The Project is titled as “INDUSTRIAL REVIEW PROJECT” and has been prepared by Chetan.M.Daga, Deepak Lunawat, Deepesh Agarwal and Gaurav Bengani.

The Following table gives the detail about the Name, Register Number and Company of a particular Student.

Name Register No Company Company Logo

Chetan M Daga

08D1246 EMAMI LTD

Deepak Lunawat

08D1247 COLGATE PALMOLIVE INDIA LTD

Deepesh Agarwal

08D1248 GILLETTE INDIA

Gaurav Bengani

08D1249 GLAXOSMITHKLINE CONSUMER AND HEALTHCARE LTD

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An In troduc t ion to the Ind ian Indus try

Ind i an economy i s one o f t he f a s t e s t g rowing i n t he wor ld . I t s GDP

g rowth r a t e i s 6 . 5% wi th a GDP o f rupees 177000 c ro re , wh i ch i s t he

fou r th l a rge s t i n t he wor ld and t he 12 th l a rge s t e conomy in t he wor ld .

The coun t ry i s f a s t adap t i ng t o i ndus t r i a l i z a t i on , t he speed o f wh ich i s

measu red a s t he s econd f a s t e s t i n t he wor ld . The ma jo r i ndus t r i e s o f

I nd i a a r e au tomob i l e s , c emen t , chemica l s , consumer e l e c t ron i c s , f ood

p roce s s ing , mach ine ry , m in ing , pe t ro l eum, pha rmaceu t i c a l s , s t e e l ,

t r an spo r t a t i on equ ipmen t , and t ex t i l e s .

I n t he pos t l i be r a l i z a t i on e r a t he coun t ry ha s c ap i t a l i s ed on i t s va s t

poo l o f educa t ed , Eng l i sh speak ing manpower t o become a ma jo r power

i n Ou t sou rc ing , I n fo rma t ion Techno logy , f i nanc i a l and b iomed ica l

t e chno logy r e sea r ch , bank ing & in su rance , and r ea l e s t a t e deve lopmen t .

FMCG SECTOR

An In troduc t ion

Fas t Mov ing Consumer Goods (FMCG) goods a r e popu l a r l y named a s

consumer packaged goods . I t ems i n t h i s c a t ego ry i nc lude a l l

consumab le s (o the r t han g roce r i e s / pu l s e s ) peop l e buy a t r egu l a r

i n t e rva l s . The mos t common in t he l i s t a r e t o i l e t soaps , de t e rgen t s ,

shampoos , t oo thpas t e , shav ing p roduc t s , shoe po l i sh , packaged

foods tu f f , and househo ld acce s so r i e s and ex t ends t o c e r t a i n e l e c t ron i c

goods . These i t ems a r e mean t f o r da i l y o f f r equen t consumpt ion and

have a h igh r e tu rn .

A ma jo r po r t i on o f t he mon th ly budge t o f e ach househo ld i s r e se rved

fo r FMCG p roduc t s . The vo lume o f money c i r cu l a t ed i n t he e conomy

aga in s t FMCG p roduc t s i s ve ry h igh , a s t he number o f p roduc t s t he

consumer u se i s ve ry h igh . Compe t i t i on i n t he FMCG sec to r i s ve ry

h igh r e su l t i ng i n h igh p r e s su re on marg in s .

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FMCG compan i e s ma in t a in i n t ense d i s t r i bu t i on ne twork . Compan i e s

spend a l a rge po r t i on o f t he i r budge t on ma in t a in ing d i s t r i bu t i on

ne tworks . New en t r an t s who w i sh t o b r i ng t he i r p roduc t s i n t he na t i ona l

l eve l need t o i nves t huge sums o f money on p romot ing b r ands .

Manufac tu r i ng can be ou t sou rced . A r ecen t phenomenon i n t he s ec to r

was en t ry o f mu l t i na t i ona l s and cheape r impor t s . A l so t he ma rke t i s

more p r e s su r i z ed w i th p r e sence o f l oca l p l aye r s i n ru r a l a r ea s and s t a t e

b r ands .

Overv i ew o f FMCG Sec tor

What a r e FMCGs?

We r egu l a r l y t a l k abou t t h ings l i ke bu t t e r , po t a to ch ip s , t oo thpas t e s ,

r a zo r s , househo ld ca r e p roduc t s , packaged food and beve rages , e t c . Bu t

do we know unde r wh ich ca t ego ry t he se t h ings come? They a r e c a l l ed

FMCGs . FMCG i s an ac ronym fo r Fa s t Mov ing Consumer Goods , wh ich

r e f e r t o t h ings t ha t we buy f rom loca l supe rmarke t s on da i l y ba s i s , t he

t h ings t ha t have h igh t u rnove r and a r e r e l a t i ve ly cheape r .

FMCG Produc t s and Categor i e s

- Pe r sona l Ca re , Ora l Ca re , Ha i r Ca re , Sk in Ca re , Pe r sona l Wash

( soaps ) ;

- Cosme t i c s and t o i l e t r i e s , deodo ran t s , pe r fumes , f emin ine hyg i ene ,

pape r p roduc t s ;

- Househo ld ca r e f ab r i c wash i nc lud ing l aund ry soaps and syn the t i c

de t e rgen t s ; househo ld c l e ane r s , such a s d i sh /u t ens i l c l e ane r s , f l oo r

c l e ane r s , t o i l e t c l e ane r s , a i r f r e shene r s , i n sec t i c i de s and mosqu i t o

r epe l l en t s , me t a l po l i sh and fu rn i t u r e po l i sh ;

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FMCG in 2006

The pe r fo rmance o f t he i ndus t ry was i ncons i s t en t i n t e rms o f s a l e s and

g rowth fo r ove r 4 yea r s . The i nves to r s i n t he s ec to r we re no t ga ine r s a t

pa r w i th o the r booming s ec to r s . Af t e r two yea r s o f s i nk ing pe r fo rmance

o f FMCG sec to r , t he yea r 2005 had w i tne s sed t he FMCGs demand

g rowing . S t rong g rowth was s een ac ros s va r i ous s egmen t s i n FY06 .

Wi th t he r i s e i n d i sposab l e i ncome and t he economy in good hea l t h , t he

u rban consumer s con t i nued w i th t he i r shopp ing sp ree .

- Food and hea l t h beve rages , b r anded f l ou r , b r anded suga rcane , bake ry

p roduc t s such a s b r ead , b i s cu i t s , e t c . , m i lk and da i ry p roduc t s ,

beve rages such a s t e a , co f f ee , j u i c e s , bo t t l ed wa t e r e t c , snack food ,

choco l a t e s , e t c .

- F r equen t l y r ep l aced e l ec t ron i c p roduc t s , such a s aud io equ ipmen t s ,

d ig i t a l c amera s , Lap tops , CTVs ; o the r e l e c t ron i c i t ems such a s

Re f r i ge r a to r , wash ing mach ine s , e t c . coming unde r t he c a t ego ry o f

Whi t e Goods i n FMCG;

Sec to r Ou t look :

FMCG is the fourth largest sector in the Indian Economy with a total market size of

Rs1,25,000crore ($25 billion) crore sales and is expected to grow to Rs 4,50,000 crore ($95

billion) by 2018. This will be a result of GST (Goods & Service Tax) – announced to be

implemented from 1st April, 2010– and possible opening of retail to foreign investment

(FDI), will ensure multi-fold growth for FMCG sector in the next 10 years. FMCG sector

generates 5% of total factory employment in the country and is creating employment for three

million people, especially in small towns and rural India

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Analys i s o f FMCG Sec tor

Strengths:

1. Low operational costs.

2. Presence of established distribution networks in both urban and rural areas.

3. Presence of well-known brands in FMCG sector.

Weaknesses:

1. Lower scope of investing in technology and achieving economies of scale, especially in small sectors.

2. Low export levels.

3. The "Me-too" products, which illegally mimic the labels of the established brands, narrow the scope of FMCG products in rural and semi-urban market.

4. Huge number of alternatives, leading to confusion in minds of the customers.

Opportunities:

1. Untapped rural markets.

2. Rising income levels; i.e. increase in purchasing power of consumers

3. Large domestic market- a population of over one billion.

4. Export potential

5. High consumer goods spending

Threats:

1. Removal of import restrictions resulting in replacing of domestic brands

2. Slowdown in rural demand.

3. Tax and regulatory structure

4. Heavy competition.

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Scope o f the Sec tor

The Ind i an FMCG sec to r w i th a ma rke t s i z e o f US$25 b i l l i on i s t he

fou r th l a rge s t s ec to r i n t he e conomy . A we l l - e s t ab l i shed d i s t r i bu t i on

ne twork , i n t ense compe t i t i on be tween t he o rgan i zed and uno rgan i zed

s egmen t s cha rac t e r i z e s t he s ec to r . FMCG Sec to r i s expec t ed t o g row by

ove r 60% by 2010 . I t had been e s t ima t ed t ha t FMCG sec to r w i l l r i s e

f rom a round Rs 56 ,500 c ro re s i n 2005 t o Rs 92 ,100 c ro re s i n 2010 . Ha i r

c a r e , househo ld ca r e , ma l e g rooming , f ema le hyg i ene , and t he

choco l a t e s and con fec t i one ry ca t ego r i e s a r e e s t ima t ed t o be t he f a s t e s t

g rowing s egmen t s , s ays an HSBC repo r t . Though t he s ec to r w i tne s sed a

s l ower g rowth i n 2002 -2004 , i t ha s been ab l e t o make a f i ne r e cove ry

s i nce t hen .

Fo r example , H indus t an Un i l eve r L imi t ed (HUL) ha s shown a hea l t hy

g rowth i n t he p r ev ious f ew qua r t e r s . An e s t ima t ed doub l e -d ig i t g rowth

ove r t he nex t f ew yea r s shows t ha t t he good t imes a r e l i ke ly t o

con t i nue .

Growth Prospec t s :

With t he p r e sence o f a round 12 .5% o f t he wor ld popu l a t i on i n t he

v i l l age s o f I nd i a , t he Ind i an ru r a l FMCG marke t i s some th ing no one

can ove r look . I nc r ea sed focus on f a rming s ec to r w i l l boos t r u r a l

i ncomes , hence p rov id ing be t t e r g rowth p rospec t s t o t he FMCG

compan i e s . Be t t e r i n f r a s t ruc tu r e f a c i l i t i e s w i l l improve t he i r supp ly

cha in . FMCG sec to r i s a l so l i ke ly t o bene f i t f r om g rowing demand i n

t he ma rke t . FMCG compan i e s have immense pos s ib i l i t i e s f o r g rowth .

And i f t he compan i e s a r e ab l e t o change t he mindse t o f t he consumer s ,

i . e . i f t hey a r e ab l e t o t ake t he consumer s t o b r anded p roduc t s and o f f e r

new gene ra t i on p roduc t s , t hey wou ld be ab l e t o gene ra t e h ighe r g rowth

i n t he nea r f u tu r e . Howeve r , t he demand i n u rban a r ea s wou ld be t he

key g rowth d r i ve r ove r t he l ong t e rm .

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A l so , i nc r ea se i n t he u rban popu l a t i on , a l ong w i th i nc r ea se i n i ncome

l eve l s and t he ava i l ab i l i t y o f new ca t ego r i e s , wou ld he lp t he u rban

a r ea s ma in t a in t he i r pos i t i on i n t e rms o f consumpt ion . A t p r e sen t ,

u rban Ind i a a ccoun t s f o r 63% o f t o t a l FMCG consumpt ion , w i th ru r a l

I nd i a a ccoun t i ng fo r t he r ema in ing 37%. Howeve r , r u r a l I nd i a a ccoun t s

f o r more t han 41% consumpt ion i n ma jo r FMCG ca t ego r i e s such a s

pe r sona l c a r e , f ab r i c c a r e , and ho t beve rages . I n u rban a r ea s , home and

pe r sona l c a r e c a t ego ry , i nc lud ing sk in ca r e , househo ld ca r e and

f emin ine hyg i ene , w i l l keep g rowing a t r e l a t i ve ly a t t r a c t i ve r a t e s .

Wi th in t he foods s egmen t , i t i s e s t ima t ed t ha t p roce s sed foods , bake ry ,

and da i ry a r e l ong - t e rm g rowth ca t ego r i e s i n bo th ru r a l and u rban

a r ea s .

Fac tors tha t make Ind ia a compet i t i ve p layer in FMCG sec tor :

Ava i lab i l i t y o f raw mater ia l s :

Because o f t he d ive r se ag ro -c l ima t i c cond i t i ons i n Ind i a , t he r e i s a

l a rge r aw ma te r i a l ba se su i t ab l e fo r f ood p roce s s ing i ndus t r i e s . I nd i a i s

t he l a rge s t p roduce r o f l i ve s tock , m i lk , suga rcane , coconu t , sp i ce s and

ca shew and i s t he s econd l a rge s t p roduce r o f r i c e , whea t and f ru i t s

&vege t ab l e s . I nd i a a l so p roduces c aus t i c soda and soda a sh , wh ich a r e

r equ i r ed fo r t he p roduc t i on o f soaps and de t e rgen t s . The ava i l ab i l i t y o f

t he se r aw ma te r i a l s g ive s Ind i a t he l oca t i on advan t age .

Cost o f Labour :

Low cos t l abo r g ive s Ind i a a compe t i t i ve advan t age . I nd i a ' s l abo r cos t

i s amongs t t he l owes t i n t he wor ld , a f t e r Ch ina & Indones i a . Low l abo r

cos t s g ive t he advan t age o f l ow cos t o f p roduc t i on . Many MNC' s have

e s t ab l i shed t he i r p l an t s i n Ind i a t o ou t sou rce fo r domes t i c and expo r t

ma rke t s .

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Presence acros s va lue cha in :

Ind i an compan i e s have t he i r p r e sence ac ros s t he va lue cha in o f FMCG

sec to r , r i gh t f r om the supp ly o f r aw ma te r i a l s t o packaged goods i n t he

food -p roce s s ing s ec to r . Th i s b r i ngs Ind i a a more cos t compe t i t i ve

advan t age . Fo r example , Amul supp l i e s m i lk a s we l l a s da i ry p roduc t s

l i ke chee se , bu t t e r , e t c .

7 Reasons why FMCG can be pursued as a Career

Indus try Background

FMCG indus try c r ea t e s a w ide r ange o f j ob oppo r tun i t i e s . Th i s

i ndus t ry i s a s t ab l e , d ive r se , cha l l eng ing and h igh p ro f i l e i ndus t ry

p rov id ing a w ide r ange o f j ob ca t ego r i e s l i ke s a l e s , supp ly cha in ,

f i nance , ma rke t i ng , ope ra t i ons , pu rchas ing , human r e sou rce s , p roduc t

deve lopmen t , and gene ra l managemen t .

FMCG i s one o f t he mos t dynamic doma ins o f t he bus ine s s wor ld . I n

t h i s s ec to r , one needs t o be f a s t i n t r ans l a t i ng t he i dea s i n to new

p roduc t s . The re i s a r equ i r emen t t o c r ea t e t he p roduc t s t ha t peop l e

t r u s t , en joy and u se i n t he i r da i l y l i ve s . Adve r t i s i ng and marke t i ng

have a v i t a l r o l e t o p l ay i n t h i s .

Ski l l s Requ ired

FMCG sec to r r equ i r e s huge amoun t o f commerc i a l awa renes s ; one mus t

have t he sk i l l s o f a t e am p l aye r . Apa r t f r om tha t , good numer i ca l sk i l l s ,

commun ica t i on and o rgan i za t i ona l sk i l l s a r e a l l e s s en t i a l f o r a

succe s s fu l c a r ee r i n t h i s i ndus t ry . Key sk i l l s w i l l a l so depend upon t he

t ype o f pos i t i on you wan t t o pu r sue , i . e . ma rke t i ng , human r e sou rce s ,

f i nance , e t c .

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The r ea sons why one shou ld pu r sue one ' s c a r ee r i n FMCG sec to r :

1 . Job s ecur i ty

I t i s a s t ab l e i ndus t ry . Un l ike some o the r i ndus t r i e s , such a s

au tomob i l e s , IT , and av i a t i on , FMCG indus t ry does no t su f f e r f rom

mass l ayo f f s , when t he economy s t a r t s t o d ip . One may d rop t he i dea o f

buy ing a c a r bu t no t t he i dea o f hav ing d inne r . Th i s l ends FMCG a l eve l

o f j ob s ecu r i t y unknown in o the r i ndus t r i e s e spec i a l l y du r ing t he

Cur r en t s l owdown .

2 . A h igh pro f i l e indus try

Ind i a ha s b i l l i ons o f peop l e and a l l a r e consumer s . The re fo re eve ryone

i s a f f ec t ed by FMCG sec to r . Peop l e now a r e ge t t i ng more hea l t h

consc ious and abou t wha t t hey a r e e a t i ng . A l l t h i s ha s become pos s ib l e

because o f t he f r equen t d i sp l ay o f va r i ous adve r t i s emen t s , such a s

p ro t e s t s aga in s t t he gene t i c mod i f i c a t i on o f f oods , t he g rowing p rob l em

o f obes i t y , e t c .

3 . Quick exper i ence

Cons ide r an example : One pe r son i s work ing i n t he s a l e s o f au tomob i l e s

wh i l e t he o the r one i s work ing i n t he s a l e s o f beve rages . A t t he end o f

t he mon th , t he pe r son who i s work ing fo r t he s a l e s o f au tomob i l e s may

s e l l 2 o r 3 un i t s , i f he i s f o r t una t e . On t he o the r hand , t he o the r pe r son

s e l l s a l a rge number o f p roduc t s eve ry day . De f in i t e l y , t he pe r son

s e l l i ng beve rages w i l l ge t more expe r i enced i n l e s s t ime work ing i n

FMCG than any o the r s ec to r , no ma t t e r whe the r i n s a l e s , ma rke t i ng ,

ope ra t i ons , a ccoun t i ng , e t c . I n t he end , one w i l l l and up l e a rn ing more

and ga in ing a f i rm g ra sp o f ba s i c bus ine s s sk i l l s .

4 . A wide range o f exper i ence

One can have a w ide r ange o f cho i ce s i f one de s i r e s a c a r ee r pa th i n

FMCG sec to r . The " f a s t mov ing" pa r t o f FMCGs r equ i r e s peop l e who

a r e f l ex ib l e . I n t e r0depa r tmen t t r ans f e r s a r e ve ry common . One w i l l ge t

t o l e a rn a l o t , even i f one en t e r s t h i s s ec to r f o r a sho r t du ra t i on .

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5 . An indus try tha t thr ive s on innovat ion

FMCG sec to r g ive s t he oppo r tun i t y t o do c r ea t i ve work . The re i s a

cons t an t r equ i r emen t o f i nnova t i on i n p roduc t i on , adve r t i s i ng ,

packag ing and b r and ing . FMCG o f f e r s an oppo r tun i t y t o exp re s s ones

c r ea t i v i t y t h rough deve lop ing new idea s fo r p roduc t s , a s b r ands

compe t e head t o head on t he she l f .

6 . Nat ionwide oppor tun i t i e s , bo th urban and rura l

FMCG sec to r o f f e r s oppo r tun i t i e s t h rough i t s connec t i on t o t he p r ima ry

s ec to r i n ru r a l and u rban a r ea s . The s ec to r i s pa r t i cu l a r l y a t t r a c t i ve fo r

t hose i n t e r e s t ed i n work ing i n d i f f e r en t pa r t s o f t he coun t ry , a s i t ha s a

na t i onwide ba se , un l i ke many o the r s ec to r s con f ined t o pa r t i cu l a r

l oca t i ons .

7 . Of f shore oppor tun i t i e s

The In t e rna t i ona l o f f i c e s o f mos t FMCG mul t i na t i ona l s r egu l a r l y

r e c ru i t s t a f f f r om ou r coun t ry , e i t he r f o r sho r t p ro j ec t s o r f o r l onge r

s t i n t s .

Ind ian Consumer C las s

I nd i a ha s a popu l a t i on o f ove r 1 b i l l i on and 4 c l ima t i c zones .

Seve ra l r e l i g ious and pe r sona l be l i e f s , 15 o f f i c i a l l anguages , d i f f e r en t

soc i a l cu s toms and food hab i t s cha rac t e r i s e Ind i an consumer c l a s s .

Bes ide s , I nd i a i s a l so d i f f e r en t i n cu l t u r e i f compa red w i th o the r As i an

coun t r i e s . The re fo re , I nd i a ha s h igh d i s t i nc t i venes s i n demand and t he

compan i e s i n Ind i a c an ge t l o t o f ma rke t oppo r tun i t i e s f o r va r i ous

c l a s se s o f consumer s . Consumer goods marke t e r s ’ expe r i ence t ha t

dea l i ng w i th Ind i a i s l i ke dea l i ng w i th many sma l l ma rke t s a t t he s ame

t ime .

Page | 10

Ind i an consumer goods marke t i s expec t ed t o r e ach $400 b i l l i on by

2010 . I nd i a ha s t he younges t popu l a t i on amongs t t he ma jo r coun t r i e s .

The re a r e a l o t o f young peop l e i n Ind i a i n d i f f e r en t i ncome ca t ego r i e s .

Consumer goods marke t e r s a r e o f t en f aced w i th a d i l emma r ega rd ing

t he cho i ce o f app rop r i a t e ma rke t s egmen t .

I n Ind i a t hey do no t have t o f a ce t h i s d i l emma l a rge ly because r ap id

u rban i za t i on , i nc r ea se i n demand , p r e sence o f l a rge number o f young

popu l a t i on , any number o f oppo r tun i t i e s i s ava i l ab l e . The bo t t om l i ne i s

t ha t I nd i an marke t i s chang ing r ap id ly and i s showing unp receden t ed

consumer bus ine s s oppo r tun i t y .

As t he r e s t r i c t i ons on fo r e ign i nves tmen t s we re r e l axed i n 1991 , Mul t i -

Na t i ona l Compan i e s have been en t e r i ng Ind i a s i nce t hen .

Recent Deve lopments in Fas t Mov ing Consumer Goods (FMCG)

Sec tor

FMCG sec to r i s no doub t r eg i s t e r i ng an up t r end i n g rowth . Acco rd ing

t o CNBC, FMCG sec to r g rowth s t o ry w i l l con t i nue because o f t he

pos i t i ve budge t . Neve r the l e s s , t he r e a r e some ba r r i e r s t o t he g rowth o f

t he s ec to r . I nd i r ec t t axe s cons t i t u t e no l e s s t han 35% o f t he t o t a l co s t

o f consumer p roduc t s - t he h ighes t i n As i a . Las t yea r , F inance Min i s t e r

p roposed t o i n t roduce an i n t eg ra t ed Goods and Se rv i ce Tax by Apr i l

2010 .Th i s i s an excep t i ona l l y good move because t he g rowth o f

consumpt ion , p roduc t i on , and emp loymen t i s d i r e c t l y p ropo r t i ona t e t o

r educ t i on i n i nd i r ec t t axe s .

Page | 11

Budge t 2008 -2009 for FMCG Sec tor

The i ncome t ax p ropos i t i ons have an i nd i r ec t impac t on FMCG sec to r .

More d i sposab l e i ncome in t he hands o f consumer s w i l l enab l e t hem to

g r adua t e t o h igh end ca t ego ry p roduc t s . Ove ra l l FMCG p roduc t

consumpt ion i s expec t ed t o i nc r ea se i n u rban a s we l l a s r u r a l a r ea s .

P roposed i nc r ea se o f t he co rpus o f r u r a l i n f r a s t ruc tu r e deve lopmen t

fund t o Rs .140bn w i l l bene f i t t o r u r a l deve lopmen t wh ich u l t ima t e ly

i nc r ea se p roduc t pene t r a t i on i n ru r a l a r ea s . Reduc t i on o f Exc i s e du ty

f rom 16% to 14% wi l l bene f i t s e c to r a s a who le

Du ty impose on non - f i l t e r C iga re t t e s i s pos i t i ve fo r ITC a s i t ha s f i l t e r

c i ga r e t t e s .

Reduc t i on i n CST f rom 3% to 2% i s pos i t i ve fo r a l l f ood p roce s s ing

compan i e s .

Exc lu s ion o f t e a & co f f ee f rom exc i s e du ty w i l l no t on ly bene f i t

consumer s bu t a l so t o t he compan i e s l i ke ITC , HUL, Ta t a Tea , Ta t a

Cof f ee , Nes t l e , e t c .

Corpora te Soc ia l Respons ib i l i t y

FMCG compan i e s have now s t a r t ed t ak ing Corpo ra t e Soc i a l

Respons ib i l i t y s e r i ous ly . Fo r i n s t ance , t o encoun t e r domes t i c v io l ence ,

Ponds ha s t i ed up w i th t he Un i t ed Na t i ons Deve lopmen t Fund (UNDF)

fo r Women . Su r f Exce l i s f und ing t he educa t i on o f ch i l d r en . Mos t

b r ands l i nk t hemse lve s w i th t he soc i a l c ause s , t he r eby l i nk ing

consumer s w i th t he b r ands and ga in ing goodwi l l i n t he ma rke t .

Page | 12

FMCG ON BUYING SPREE

To a t t a i n a max imum g rowth , many FMCG compan i e s have f i xed

va r i ous ma jo r buy ou t dea l s i n bo th domes t i c a s we l l a s i n t e rna t i ona l

ma rke t . As an example , Ta t a Tea , t he l a rge s t t e a manufac tu r i ng

company i n Ind i a and t he s econd l a rge s t t e a company i n t he wor ld and

i t s p romote r Ta t a Sons had j o in t l y a cqu i r ed a 30% s t ake i n Ene rgy

b r ands Inc (Ene rgy Brands was founded i n 1996 and i s a subs id i a ry o f

Coca -Co la . ) f o r Rs . 3148 c ro re i n Augus t 2006 . Th i s a cqu i s i t i on was

t he t h i rd l a rge s t g loba l a cqu i s i t i on a f t e r V ideocon and Ta t a S t ee l by an

Ind i an company .

A l so i n t he yea r 2006 , Ta t a Cof f ee L td . Acqu i r ed E igh t O ' C lock co f f ee

company (EOC) , USA f rom Gryphon Inves to r s wor th Rs 1015 c ro re .

I n ano the r example , Mar i co L td . - a l e ad ing Ind i an g roup i n Consumer

P roduc t s and Se rv i ce s , a cqu i r ed H indus t an Un i l eve r L td ' s b r and N iha r

fo r Rs 227 c ro r e i n 2006 . I n t he s ame yea r Mar i co had acqu i r ed two

Egyp t i an co lo r and ha i r c a r e b r and by t he name o f Ha i rmode and

f i ancée .

I n domes t i c ma rke t Godre j Beve rages & foods L td . (GBFL) ha s

a cqu i r ed Nu t r i ne , a con fec t i ona ry b r and . Emami ’ s a cqu i s i t i on o f Zandu

i s a l so a no t ab l e one .

These acqu i s i t i ons have p l ayed a ma jo r r o l e t o push t he g rowth i n t he

s ec to r . A l so t he FMCG ma jo r s h iked t he p r i c e s and t ha t move p roved t o

be good fo r t hem. Ano the r f a c to r t ha t i s d r i v ing t he g rowth up i s

i nc r ea se i n adve r t i s i ng budge t s , and i nves t i ng heav i l y beh ind b r ands .

Page | 13

In e s sence , t he ma jo r f a c to r s t ha t have p rope l l ed t he g rowth o f FMCG

Sec to r a r e :

Majo r a cqu i s i t i ons

Pr i c ing power

Ef fec t i ve ma rke t i ng and adve r t i s i ng s t r a t egy .

Ma jo r FMCG compan i e s a r e now p l ann ing t o en t e r new ca t ego r i e s w i th

f r e sh marke t i ng ob j ec t i ve s and a r e a l so gea r i ng up fo r more acqu i s i t i on

i n domes t i c and i n t e rna t i ona l ma rke t s t ha t w i l l c e r t a i n ly g ive a spu r t o

t he g rowth i n FMCG sec to r .

FMCG REPORT AT THE ONSET OF 2008

We be l i eve t ha t i n a s cena r io o f a buoyan t e conomy and mu l t i p l e

g rowth t r i gge r s be ing i n p l ace , t he FMCG sec to r shou ld su s t a in robus t

g rowth momen tum. We expec t new p roduc t deve lopmen t s , be t t e r hea l t h

and happ i e r t a s t e buds i n t he FMCG sec to r .

Momen tum to su s t a in : Wi th Ind i a r i s i ng , t he ou t l ook o f I nd i ans i s

chang ing t oo . They a r e w i l l i ng t o expe r imen t and t r y ou t new p roduc t s .

Cap tu r i ng i n s igh t s i n to t he i r needs and syn the s i z ing t he se i n to

s t r a t eg i e s and f i na l p roduc t f o rma t s p r e sen t s a new oppor tun i t y fo r

FMCG p l aye r s . Up g rada t i on f rom unb randed t o b r anded goods

(packaged g roce ry , househo ld c l e an ing p roduc t s ) , demand o f emerg ing

ca t ego r i e s ( b r eak fa s t c e r ea l s , ha i r co lou r s ) and hea l t h and hyg i ene

p roduc t s ( chyavanp ra sh ) wou ld be t he g rowth d r i ve r s .

Go ing ru r a l : As pe r Asschom, FMCG wi l l be w i tne s s ing more t han 50%

o f i t s g rowth i n t he ru r a l and s emi -u rban s egmen t s by 2010 . Cur r en t l y ,

nea r l y 34% o f t he o f f t ake o f FMCG compan i e s come f rom ru ra l a r ea s .

As s een l i ke l a s t yea r , even i n 2008 , t he ru r a l a r ea s wou ld p rov ide a

huge po t en t i a l .

Page | 14

Compan ie s l i ke HUL, ITC and Co lga t e have a l r e ady e s t ab l i shed good

d i s t r i bu t i on ne tworks i n t he se r eg ions . O the r compan i e s wou ld s t a r t

c a t e r i ng t o t he se r eg ions i n nea r f u tu r e .

Hea l t h and we l l ne s s : Wi th t he g rowth p rospec t s o f t he e conomy and

s ec to r i n p l ace , t hough mos t o f t he c a t ego r i e s w i l l con t i nue t he i r

g rowth , p roce s sed foods and t he Pe r sona l Ca re s egmen t i s l i ke ly be t he

f a s t e s t g rowing s egmen t s .

Foods : Food fo rms t he l a rge s t componen t o f t he t o t a l consumpt ion

expend i t u r e i n Ind i a a ccoun t i ng fo r a s much a s 51%. Th i s i s h ighes t

compa red t o 9 .7% fo r an ave rage Amer i can pe r son and 15% fo r bo th

J apanese and Br i t i sh . Though w i th r i s i ng i ncome , t he sha re wou ld go

down , bu t wou ld i nc r ea se i n abso lu t e t e rms . Fu r the r , t he compan i e s a r e

w iden ing t he i r hea l t h food po r t fo l i o t o t a rge t t he r i ch , hea l t h consc ious

u rbans . Dabur , HUL and ITC have made i nves tmen t s i n t h i s s egmen t .

Va lue g rowth : A long w i th vo lume g rowth we expec t t he va lue g rowth t o

be s t rong t oo . The compan i e s wou ld t ake s e l ec t i ve h ike s i n p r i c e t o

mee t t he i n f l a t i ona ry p r e s su re . A l so t he consumer s wou ld upg rade f rom

mass b r ands t o p r emium b rands , wh ich wou ld be a key d r i ve r i n t he

va lue g rowth .

Re t a i l f o rma t s : I nd i a i s w i tne s s ing a r e t a i l i ng r evo lu t i on i n r e cen t

t imes . Whi l e some r e t a i l cha in s a r e o f l a rge r e t a i l f o rma t s enab l i ng

huge vo lumes , some a r e focused on a f fo rdab i l i t y and t he r eby squeez ing

t he ma rg in s . On ly 4% re t a i l ou t l e t s a r e i n t he o rgan i s ed s ec to r , t he r eby

r educ ing t he r e ach . Wi th FDI expec t ed t o be a l l owed , t he sha re f rom

the r e t a i l f o rma t s by t he FMCG p l aye r s i s expec t ed t o i nc r ea se .

Page | 15

Cut - t h roa t compe t i t i on : FMCG compan i e s con t i nue t o f a ce i n t ense

compe t i t i on . P l aye r s f rom uno rgan i zed and o rgan i zed s ec to r s con t i nue

t o g r ab each o the r ’ s ma rke t sha r e s . Low b rand awarenes s enab l e s l oca l

p l aye r s t o ma rke t t he i r spu r ious l ook -a l i ke b r ands . A l so w i th en t ry o f

ex i s t i ng p l aye r s i n new segmen t s l i ke ITC’s en t ry i n pe r sona l c a r e

p roduc t s , Dabu r ’ s p l ans t o ven tu re i n to hea l t h beve rages wou ld add t o

t he a l r e ady agg re s s ive env i ronmen t r e su l t i ng i n h igh p r e s su re on

marg in s .

Commodi ty p r i c e s - a key r i sk : A wor sen ing o f t he commod i ty p r i c e

env i ronmen t i s a key r i sk . I n t he l a s t two yea r s , mos t o f t he compan i e s

had f aced p r e s su re on i t s i npu t p r i c e s . C rude , pa lm o i l , whea t and

packag ing cos t s we re on a r i s e . Though mos t o f t he compan i e s had

t aken j ud i c ious p r i c e i nc r ea se s , howeve r , a su s t a ined i n f l a t i ona ry

env i ronmen t cou ld hu r t g rowth o r ma rg in s o r bo th .

Go ing fo rwa rd :

Wi th t he e conomy on a h igh g rowth f l i gh t , r obus t consumer i sm , g r ea t e r

r u r a l pene t r a t i on and r ap id ly g rowing o rgan i zed r e t a i l , we r ema in

bu l l i sh ove r t he g rowth t r a c t i on i n t he FMCG space . Whi l e ru r a l

r eg ions wou ld d r i ve consumpt ion due t o h ighe r pene t r a t i on , o rgan i s ed

r e t a i l i ng i n u rban marke t s wou ld he lp i nc r ea se va lue g rowth l ed by

demand o f p r emium p roduc t s . The sh i f t f r om uno rgan i zed t o o rgan i zed

and f rom unb randed t o b r anded w i l l add fu r t he r impe tus t o g rowth i n

t h i s s egmen t . I nd i a ' s immense popu l a t i on o f one b i l l i on -p lu s peop l e

o f f e r s t r emendous marke t po t en t i a l . Bu t i t s many l anguages , s i z e and

poo r i n f r a s t ruc tu r e c an make i t a d i f f i cu l t p l a ce t o ope ra t e . The

compan i e s w i l l have t o a l i gn i t s s t r a t eg i e s a s pe r t he chang ing

env i ronmen t , a t t i t ude s and p r e f e r ences o f t he cus tomer s t o be

succe s s fu l .

Page | 16

RURAL INDIA:

Highe r pene t r a t i on , pe r c ap i t a consumpt ion , i nc r ea s ing popu l a t i on ba se ,

and r i s i ng househo ld i ncome con t i nued t o d r i ve t he g rowth i n t he

FMCG sec to r i n FY08 . The FMCG sec to r g r ew by 12% YoY in 2007 .

Rura l r eg ions , whe re nea r l y 70% o f Ind i a ' s popu l a t i on r e s ide s ,

a ccoun t ed fo r 34% o f t he o f f t ake fo r FMCG p roduc t s . S ince u rban

r eg ions a r e a l r e ady ma tu red , t he ru r a l r eg ion i s expec t ed t o be t he key

g rowth d r i ve r . I n u rban a r ea s , i n t roduc t i on o f newer , conven i ence and

h ighe r end p roduc t s p rope l l ed t he g rowth . Howeve r , conce rns w i th

r e spec t t o t he i nc r ea s ing compe t i t i ve env i ronmen t , i npu t cos t p r e s su re s

and i n f r a s t ruc tu r e bo t t l enecks con t i nued t o wor ry .

I ndus t ry Wish L i s t

The VAT on p roce s sed foods shou ld be r educed f rom ex i s t i ng h igh

l eve l s . The pe r i shab l e foods shou ld a t t r a c t VAT o f 0% whe rea s non -

pe r i shab l e s shou ld a t t r a c t VAT o f 4%.

Exc i s e du ty shou ld be r educed , wh i l e c en t r a l exc i s e shou ld be

exempted . Taxes shou ld be conve rged i n s t ead o f cha rg ing mu l t i p l e

t axe s .

I n f r a s t ruc tu r e s t a t u s shou ld be acco rded t o ag r i -p roce s s ing i ndus t ry .

Tax b r eaks and i ncen t i ve s shou ld be g iven t o t he food p roce s s ing

i ndus t ry a s i t e s t ab l i she s a v i t a l l i nkage and syne rgy be tween t he two

p i l l a r s o f t he e conomy- indus t ry and ag r i cu l t u r e . Fu r the r , e s t ab l i shmen t

o f co ld cha in and o the r mode rn i zed t e chno logy fo r up g r ada t i on o f

s t o r age hand l i ng and t r anspo r t a t i on shou ld be g r an t ed i n f r a s t ruc tu r e

s t a t u s and t he t ax bene f i t t o spu r i t s g rowth .

Page | 17

Confedera t ion o f Ind ian Indus tr i e s

The exc i s e du ty d i f f e r ence be tween ' b r anded ' and ' unb randed ' f ood

p roduc t s ex i s t i ng a t p r e sen t shou ld be r emoved t o encou rage consumer s

t o move f rom unhyg i en i c unb randed foods t o hyg i en i ca l l y packaged

p roce s sed foods .

Th rus t on be t t e r packag ing shou ld be made . Impor t du ty on packag ing

mach ine ry shou ld be n i l . I ncen t i ve s , whe reve r nece s sa ry , shou ld be

g iven t o t he i npu t s i de l i ke c ap i t a l goods , i n f r a s t ruc tu r e deve lopmen t ,

new t echno logy , e t c f o r t he domes t i c packag ing i ndus t ry . A l so t he t axe s

shou ld be r a t i ona l i z ed . These i n i t i a t i ve s wou ld he lp t o r educe t he

was t ages and r a i s e t he qua l i t y o f expo r t ab l e food p roduc t s .

Budge t over the years

Budge t 2005 -06

Inc r ea se i n cus toms du ty o f r e f i ned pa lm o i l t o 75%

Exc i se du ty on da i ry mach ine ry h ived o f f f r om 16%.

Imp lemen ta t i on o f VAT ac ros s a l l s t a t e s

Conces s iona l r a t e o f 5% cus tom du ty on t a e and co f f ee mach ine ry

Exc i se du ty on p r epa ra t i ons o f mea t , pou l t ry and f i sh ha lved t o

8%

Exc i se du ty on food g r ade hexane (u sed i n t he ed ib l e o i l i ndus t ry )

ha lved t o 16%

Budge t 2006 -07

Page | 18

Exc i se du ty on Condensed mi lk abo l i shed (16% ea r l i e r ) .

Exc i se du ty on Pec t i ne s and Pec t a t e s , u sed a s a ge l l i ng agen t i n

J ams and J e l l i e s abo l i shed (16% ea r l i e r ) .

Exc i se du ty on unb randed ed ib l e p r epa ra t i ons o f o i l i nc r ea sed

f rom n i l t o 8%.

Exc i se on b i s cu i t s manufac tu r ed w i thou t a i d o f power w i l l now

a t t r a c t a du ty o f 8% (n i l e a r l i e r ) .

Exc i se du ty on i c e - c r eams exempted

Exc i se on r eady t o e a t packaged food r educed f rom 16% to 8%

Exc i se on i n s t an t f ood mixes exempted

Exc i se on soaps manufac tu r ed w i thou t power w i l l now a t t r a c t 16%

du ty

Exc i se du ty on p roce s sed mea t , f i sh and pou l t ry p roduc t s r educed

f rom 8% to n i l .

Exc i se du ty on yea s t exempted

Budge t 2007 -08

Fa rm sec to r ha s been g iven t he t op p r i o r i t y . Agr i cu l t u r e

i nves tmen t s t o go up to 2% o f GDP.

Duty on ed ib l e o i l ha s been r educed .

Cus toms du ty on food p roce s s ing mach ine ry and t he i r pa r t s i s

be ing r educed f rom 7 .5% to 5%. Exc i s e du ty ha s been fu l l y

exempted on b i s cu i t s o f pe r k i l og ram r e t a i l s a l e p r i c e equ iva l en t

o f Rs .50 pe r kg o r l e s s .

Exc i se du ty on food mixes , i nc lud ing i n s t an t f ood mixes , ha s been

r educed f rom 16%/ o r 8% to N i l .

Free s amp le s and d i sp l ays a r e exempt fo rm the pu rv i ew o f FBT .

Ven tu re c ap i t a l i nves t i ng i n da i ry i ndus t ry w i l l ge t a pa s s t h rough

s t a t u s .

Be t t e r r u r a l i n f r a s t ruc tu r e deve lopmen t t o be an a r ea o f f ocus .

Budge t 2008 -09

Page | 19

Reduc t i on i n exc i s e du ty f rom 16% to n i l on t e a and co f f ee mixes .

Cus toms du ty on bac to fuges ha s been r educed f rom 7 .5% to N i l .

Cus toms du ty on f eed add i t i ve s /p r e -mixes ha s been r educed f rom

30% to 20%.

Cus toms du ty i s be ing r educed on v i t amin p r emixes and mine ra l

m ix tu r e s f rom 30% to 20% and on phospho r i c a c id f rom 7 .5% to

5% to r educe cos t o f manufac tu r e o f da i ry and pou l t ry f e eds

Exc i se du ty on pack ing pape r ha s been r educed f rom 12% to 8%.

Exc i se du ty on pan masa l a , no t con t a in ing t obacco , w i th be t e l nu t

con t en t no t more t han 15%, ha s been r educed f rom 16% to 8%.

Exc i se du ty on i nk fo r wr i t i ng i n s t rumen t s such a s wh i t e boa rd

marke r s and t he l i ke i s be ing r educed f rom 16% to 8%.

Mentho l i s f u l l y exempted f rom exc i s e du ty .

Rs .40 c ro r e i n 2008 -09 i s p rov ided fo r Spec i a l Pu rpose Tea Fund

fo r r e -p l an t a t i on & r e juvena t i on and s im i l a r suppo r t t o c a rdamom,

rubbe r & co f f ee i s a l so g iven . C rop i n su rance s cheme fo r t e a ,

r ubbe r , t obacco , ch i l l i , g i nge r , t u rmer i c , peppe r and ca rdamom i s

t o be i n t roduced .

Budge t 2009-10

Page | 20

Emphas i s i s on ag r i cu l t u r e , r u r a l g rowth , r u r a l i n f r a s t ruc tu r e i s l i ke ly

t o i nc r ea se . I ncome in t he hands o f r u r a l peop l e and t he r eby l e ad t o

i nc r ea se i n consumpt ion .

Agr i cu l t u r e c r ed i t f l ow a l l oca t i on i n FY10 o f Rs . 3 , 25 ,000 c ro re

t o boos t ag r i cu l t u r e and t he r eby acce l e r a t e ru r a l demand .

In t e r e s t subven t i on s cheme on sho r t t e rm loan t o be con t i nued and

add i t i ona l subven t i on o f 1% to be g iven t o t hose f a rmer s who

r epay sho r t t e rm c rop l oan on t ime t o Encou rage f a rmer s t o r epay

l oan on t ime t o s ave i n t e r e s t and t he r eby s t imu la t e consumpt ion

Al loca t i on unde r NREGS inc rea sed by 144% to Rs . 39 ,100 c ro re

and r ea l wage o f Rs . 100 /day p rov ided unde r NREGA to i nc r ea se

emp loymen t i n ru r a l a r ea s and t he r eby boos t r u r a l consumpt ion

Abol i t i on o f FBT – pos i t i ve fo r a l l FMCG compan i e s

Pe r sona l I ncome Tax s l abs r a i s ed by Rs . 10 ,000 fo r ma l e &

f ema le and Rs . 15 ,000 fo r s en io r c i t i z ens , t h i s w i l l r e su l t i n

s av ings and t he r eby encou rage consumpt ion .

A l l FMCG compan i e s a r e l i ke ly t o bene f i t f r om th i s a s a l l compan i e s

have s t a r t ed focus ing on ru r a l I nd i a fo r d r i v ing vo lume g rowth .

No i nc r ea se i n exc i s e du ty on c iga r e t t e s i s a pos i t i ve move fo r ITC

HUL, Ta t a Tea , ITC

Key Pos i t i ve s

Rura l pene t r a t i on l eve l s a r e i nc r ea s ing : Acco rd ing t o e s t ima t e s , on ly

abou t 11% to 13% o f t he t o t a l f ood p roduc t i on i s consumed i n

p roce s sed fo rm . Th i s speaks fo r i t s e l f , h i gh l i gh t i ng t he s cope fo r

g rowth . The p l anned deve lopmen t o f r oads , po r t s , r a i lways and a i rpo r t s ,

i s i nc r ea s ing FMCG pene t r a t i on i n t he ru r a l a r ea s .

Newer produc t s : As g rowth ha s shown s igns o f s l a cken ing compan i e s

a r e i nc r ea s ing ly focus ing on key p roduc t s and b r ands , co s t e f f i c i enc i e s

Page | 21

and ru r a l ma rke t s . Th i s i s a s i gn o f ma rke t soph i s t i c a t i on , bo th f rom

the manufac tu r e r ' s po in t o f v i ew a s we l l a s t he consumer ' s po in t o f

v i ew . Wi th r i s i ng consumer i sm and chang ing l i f e s t y l e t he demand fo r

va lue added p roduc t s i s i nc r ea s ing .

Cost advantage : Owing t o Ind i a ' s co s t advan t age , many MNC

compan i e s have s t a r t ed u s ing t he i r I nd i an ope ra t i ons a s t he i r

manufac tu r i ng ba se . A l t e rna t i ve ly , some Ind i an compan i e s have t e s t ed

fo r e ign sho re s l i ke Bang l adesh , S r i Lanka and t he Midd l e Eas t among

o the r .

VAT: The p roposed i n t roduc t i on o f VAT a t t he s t a r t o f FY06 i s a l ong

t e rm pos i t i ve fo r t he FMCG sec to r . Th i s had been a l ong pend ing

demand o f t he FMCG sec to r . Pos t t h i s ; t he t ax amb igu i t y w i l l ge t

r educed , bene f i t i ng t he s ec to r .

Reta i l ing : FMCG compan i e s have pa r t ne r ed w i th mode rn r e t a i l i ng

s t o r e s and a s t h i s f o rma t i s t he fu tu r e . Growth w i l l be f a s t e r because

mode rn i s a t i on o f t he r e t a i l s e c to r w i l l be r e f l e c t ed i n r ap id g rowth i n

s a l e s o f supe rmarke t s , depa r tmen t s t o r e s and hype rmarke t s , because o f

t he g rowing p r e f e r ence o f t he a f f l uen t and uppe r m idd l e c l a s se s fo r

shopp ing a t t he se t ypes o f r e t a i l s t o r e s , g iven t he conven i ences t hey

o f f e r such a s shopp ing amb ience , va r i e t y and a s i ng l e -po in t sou rce fo r

pu rchase s .

Key Negat ive s

Page | 22

Compet i t i on : New en t r an t s i n t he s ec to r have he igh t ened compe t i t i on

i n key s egmen t s l i ke soaps and de t e rgen t s , pu t t i ng p r e s su re on

p ro f i t ab i l i t y

Higher input cos t s : The compan i e s w i tne s sed r i s e i n t he i npu t p r i c e s

du r ing t he yea r . H ighe r c rude , whea t , pa lm o i l p r i c e s amongs t o the r s

p r e s su r i z ed t he ma rg in s . Though t he compan i e s t ook e f f ec t i ve p r i c e

h ike o f t he f i na l p roduc t s , a f u r t he r h ike wou ld l e ad t o l o s s o f ma rke t

sha r e .

In fras t ruc ture : The i n f r a s t ruc tu r e fo r f r e e t r anspo r t o f goods i s no t

adequa t e i n t he coun t ry . A l so , t he f a l l i n ag r i cu l t u r a l ou tpu t con t i nues

t o c a s t on FMCG sec to r ' s p ro spec t s i n t he sho r t t e rm .

Spur ious goods : A l a rge pa r t o f t he b r anded marke t con t i nues t o be

t h r ea t ened by spu r ious goods and i l l ega l f o r e ign impor t s . I n t imes o f

weakened consumer demand such menaces con t i nue t o n igh tmare s t o

l a rge compan i e s .

Page | 23

KEY INFORMATION WHY FMCG IS ASKING SLUMP?

Whethe r i t i s a bu l l o r bea r ma rke t , r o t i , k apda and makaan con t i nue t o

r ema in t he ba s i c nece s s i t i e s o f l i f e . Whi l e makaan i s f a c ing some

t roub l e amids t t he cu r r en t s l owdown , and shopp ing fo r kapda i s no t

l i ke ly t o be a s s t r ong a s be fo re , i t i s t he ro t i componen t t ha t s t i l l

domina t e s t he consumer ’ s ba ske t .

Th i s t r end i s be ing r ep l i c a t ed i n t he f i nanc i a l ma rke t a s we l l . Hav ing

ex i t ed o the r s ec to r s l i ke r e a l t y , i n f r a s t ruc tu r e and cap i t a l goods ,

i nves to r s a r e now tu rn ing t he i r a t t en t i on t o FMCG. Th i s i s r e f l e c t ed by

t he g r adua l i nc r ea se i n i nves to r s ’ i n t e r e s t i n compan i e s t ha t f ocus on

food and o the r anc i l l a ry consumab le s r equ i r ed by househo lds . Apa r t

f r om r e t a i l i nve s to r s , even p r i va t e equ i t y i nves to r s a r e f l ock ing t o

c l i nch dea l s w i th compan i e s i n t he FMCG sec to r .

So , wha t c an be t he r e a sons beh ind t h i s sh i f t i n f ocus i n f avou r o f

FMCG compan i e s? H i s to r i c a l l y , FMCG compan i e s have ru l ed t he roos t

du r ing pe r i ods o f s l ump in t he ma rke t .

The re a r e s eve ra l f a c to r s wh ich h in t a t a r e su rgence i n i nves to r s ’

i n t e r e s t i n FMCG compan i e s . Th i s s ec to r ha s been t he be s t pe r fo rmer i n

Page | 24

va r ious qua r t e r s l i ke t he qua r t e r ended Sep t embe r ’08 . Mos t compan i e s

i n t he s ec to r have been ab l e t o wa rd o f f t he e f f ec t s o f t he s l owdown

caused due t o va r i ous f a c to r s l i ke cos t i n f l a t i on , c r ed i t c runch and

h ighe r i n t e r e s t co s t s . And t he marke t a l r e ady s eems t o be

acknowledg ing t h i s f a c t . Fo r i n s t ance , Nes t l e ha s a h ighe r m-cap t han

compan i e s l i ke Ta t a Moto r s , H inda l co and Gra s im .

Howeve r , t he FMCG sec to r i s no t ab so lu t e ly i n su l a t ed f rom mac ro -

economic f ac to r s t ha t a r e a f f ec t i ng o the r s ec to r s . A l ook a t t he

h i s t o r i c a l r evenues and p ro f i t f i gu re s o f 14 l e ad ing FMCG compan i e s

on a t r a i l i ng fou r -qua r t e r ba s i s i nd i ca t e s t ha t t he p i c tu r e ’ s no t t oo ro sy

fo r t h i s s ec to r . Whi l e t o t a l r evenues have g rown s t e ad i l y ove r t he pa s t

t h r ee yea r s , agg rega t e ope ra t i ng p ro f i t ma rg in (OPM) , t ha t had su rged

du r ing ’06 , ha s d ropped s t e ad i l y eve r s i nce .

The f a l l ha s been more p ronounced s i nce t he pa s t two qua r t e r s .

Howeve r , t he good t h ing abou t t he FMCG sec to r i s t ha t i t doe s no t

w i tne s s ex t r emes . The r ange o f t he r i s e and f a l l i n OPM in t h i s s ec to r

ha s been be tween 17% and 19 .5%, o r 250 ba s i s po in t s . Th i s i s qu i t e a

na r row r ange compa red t o i n t e r e s t r a t e - s ens i t i ve and cyc l i c a l s ec to r s ,

wh i ch a r e showing vo l a t i l e movemen t s i n pe r fo rmance .

Ano the r pos i t i ve t r end i s t ha t wh i l e mos t compan i e s i n o the r s ec to r s a r e

she lv ing t he i r a cqu i s i t i on p l ans o r go ing s l ow on expans ion , FMCG i s

one o f t he ve ry f ew sec to r s wh ich i s s ee ing i nc r ea sed M&A ac t i v i t y i n

r e cen t t imes . Emami ’ s buyou t o f Zandu Pha rma and Dabur Ind i a ’ s

a cqu i s i t i on o f Fem Ca re Pha rma a r e no t ab l e example s o f t h i s t r end .

A l so , Mar i co and Godre j Consumer P roduc t s a r e expand ing t he i r

bus ine s s i n coun t r i e s l i ke Wes t As i a , Sou th Af r i c a and Egyp t . Mos t

domes t i c compan i e s a r e l aunch ing homegrown b rands i n o the r emerg ing

marke t s .

Moreove r , I nd i a ’ s r u r a l ma rke t i s unde r -pene t r a t ed , wh ich ho ld s

immense g rowth po t en t i a l f o r t he FMCG sec to r . Mos t compan i e s have

Page | 25

dev i sed s t r a t eg i e s i nvo lv ing d i s t i nc t packag ing , d i f f e r en t i a l p r i c i ng and

l oca l adve r t i s i ng t o t ap t he se ma rke t s . The emergence o f s t r ong

r eg iona l b r ands , wh ich a r e g iv ing t ough compe t i t i on t o mu l t i na t i ona l

b r ands , a l so h igh l i gh t s t he po t en t i a l g rowth i n t he se ma rke t s .

Whi l e f e a r s o f a r e ce s s ion have r e su l t ed i n hazy g rowth p ro j ec t i ons fo r

compan i e s i n mos t o the r s ec to r s , t he FMCG segmen t p rov ide s t he much -

needed p r ed i c t ab i l i t y t o t he ma rke t . The economic p rob l ems a f f l i c t i ng

o the r s ec to r s a r e no t l i ke ly t o adve r se ly a f f ec t g rowth i n ag r i cu l t u r e ,

f ood and a l l i ed bus ine s se s . Moreove r , t he e f f ec t o f t he s l owdown i s no t

l i ke ly t o be a s bad i n t he c a se o f FMCG compan i e s , a s f o r o the r

cyc l i c a l and cap i t a l - i n t ens ive s ec to r s .

Wi th a f a i r l y s t ab l e pe r fo rmance , p r ed i c t ab l e g rowth , r e l a t i ve ly

r e ce s s ion -p roo f bus ine s s and g rowing i nves to r i n t e r e s t , i t may no t be

su rp r i s i ng i f compan i e s f rom th i s s ec to r once aga in su rge t o

p rominence . The i r r i s e , l i ke i n t he pa s t , may he ra ld t he nex t bu l l r un .

Page | 26

INTRODUCTION

EMAMI

About the Company:

Emami Ltd, the flagship company of the Rs 2000 crore Emami Group, is a leading player in

the personal and healthcare consumer products industry in India. A jewel in the crown of the

conglomerate, the company is a coveted Rs 700 crore business entity engaged in manufacture

and marketing of health, beauty and personal care products that are based entirely on

ayurvedic formulation.

Established by Mr. R S Agarwal and Mr. R S Goenka in 1974, Emami Limited has over 25

brands under its portfolio. The company’s financials show it has repeatedly outperformed the

industry standards. Emami Ltd has maintained a CAGR of 25% over the last three years

compared to the industry average of 16-17%

Understanding the human needs and fulfilling them by dint of technical research is a positive

feature of Emami. This is being made possible by Himani Ayurveda Science Foundation

(HASF) that generates the very best of ayurvedic formulations. The world class quality

control methods and processes maintained by HASF ensure optimum utility of each

ingredient. The foundation is completely engaged in constant innovation and pharmaceutical

enhancements.

Boroplus brand is the market leader in the antiseptic cream segment; the Navratna Oil is also

in the pole position in the cool oil segment. Fair and Handsome is the pioneer in the fairness

cream for men segment.

Boroplus has been selected as among the top 100 brands by the Brand Equity of The

Economic Times. In 2006 and 2007, Navratna has been ranked the 6th Most Energized Indian

Brand by the DY&R Brand Asset Valuator. Brand extensions have helped Emami

consolidate its position in the market and also cater to varied consumer needs.

Emami has recently entered the glycerine soap category with Emami Pure Skin and

petroleum jelly category with Emami Vasocare.

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Emami has successfully established its brands through strong celebrity endorsements.

Besides Amitabh Bachan and Shah Rukh, other celebrity endorsers of Emami’s brand include

Madhuri Dixit, Kareena Kapoor, Govinda, Sourav Ganguly, Chiranjeevi, Surya and Upendra

among others. 

Emami has also taken up a major revamping project to enhance the sales and distribution,

human resources development and logistics with the globally renowned professional advisory

services firm, Ernst and Young. ‘Project Navodaya’, as it is truly called, will help Emami fast

track its topline and bottom-line growth and build a robust platform for growth initiatives

Emami covers all the states with 28 depots across India. Its supply-chain management

assumes immense significance which was aptly reflected through remarkable expansion in

dealer-distribution network, outlets and manpower. The domestic sales and distribution

division directly covers 4,00,000 outlets all across the country along with an additional 2100

modern retail outlets. Emami’s products reach out to nearly 30 lakh retail outlets across India

through 4,000 distributors.

The company has ultra modern manufacturing facilities all across India including Kolkata

(West Bengal), Guwahati (Assam), Pondicherry, Uttaranchal and Baddi (Himachal Pradesh).

It has adopted the Total Quality Management system and all its manufacturing facilities have

received cGMP and ISO 9001:2000 certifications.

Recently Emami Limited with an investment of Rs 700 crore has acquired Zandu

Pharmaceuticals Works Ltd on the basis of huge business synergy between Zandu and

Emami.

Emami Ltd has recently been conferred the Most Enterprising Company of the Year by IIPM

(Indian Institute of Planning and Management) and The Sunday Indian publication of the

Planman Media Group. In 2007, the company received the Institute of Cost and Works

Accountants of India (ICWAI) Award for Excellence in Cost Management.

Vision:

Making people healthy and beautiful, naturally  

Page | 28

Mission:

• To contribute whole heartedly towards the environment and society integrating all our

stakeholders into the Emami family

• To make Emami synonymous with natural beauty and health in the consumers mind

• To effectively manage talents by building a learning organization

• To strengthen and foster in the employees, strong emotive feelings of oneness with the

company through commitment to their future

• To drive growth through quality and innovation in products and services

• To uphold the principles of corporate governance

• To encourage decision making ability at all levels of the organization 

Strive to:

• To be part of every household in the country

• To be a major player in every product category we venture into

• To be one of the most respected marketer in the country

• To be recognized as a global brand 

Core values

• Commitment & Loyalty to institutional values and principles

• Integrity

• Customer Orientation

• Leadership and Innovation

• Attention to detail

• Teamwork & Team Environment

• Simple living, High thinking

• Social Responsibility

• Environmental Safety 

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HISTORY

The inception of Emami Group took place way back in mid seventies when two childhood

friends, Mr. R.S. Agarwal and Mr. R.S. Goenka left their high profile jobs with the Birla

Group to set up Kemco Chemicals, an Ayurvedic medicine and cosmetic manufacturing unit

in Kolkata in 1974.

The company that was started with a meagre amount of Rs. 20,000, the first-rate quality of the

products soon created a consumer pull, a chain of distributors was established and the sale of

their products spread from West Bengal to rest of Eastern India and gradually to other states.

In 1978, Himani Ltd (incorporated as a Private Limited Company in 1949) had become sick

unit and was up for sale. Himani, almost a 100 year old company with good brand equity in

Eastern India and a well laid out factory in Kolkata, was producing a number of cosmetics.

Mr. Agarwal realized the opportunity and acquired Himani, it was a tough task to mobilize

resources for buying a sick unit and even tougher to turn it around to a profitable venture.

However Mr. Agarwal, supported by Mr. Goenka decided to go ahead with the deal which

later on proved to be the turning point for the organization.

Mr. Agarwal decided to produce in the Himani factory different types of health care items and

toiletries based on Ayurvedic preparation. Ten years after commencement of the company, it

launched their first flagship brand Boroplus Antiseptic Cream under the Himani umbrella in

1984. Many additional brands followed Boroplus including Boroplus Prickly Heat Powder

which came as a brand extension of the mother brand. Today Boroplus is not only the largest

selling Antiseptic Cream in India but also in Russia, Ukraine, and Nepal.

Nineties was very eventful for Emami. The next flagship brand of the company Navratna

Cool Oil came in the nineties under the Himani Umbrella and the second factory was opened

at Pondicherry to expand production. Navratna over the years has become a market leader in

the cool oil category.

The introduction of new brands continued and the distribution network of the company was

extended to South India with Navratna spear heading the process. In 1995, Kemco Chemicals,

the partnership firm was converted into a Public Limited Company under the name and style

Page | 30

of Emami Ltd. In 1998, Emami Ltd was merged with Himani Ltd and its name was changed

to Emami Ltd as per fresh certificate of incorporation dated September1, 1998.

In 2005 Emami created a marketing history in India by launching Fair and Handsome, the

first fairness cream for men. In 2006 the company decided to introduce a Health Care

Division and a number of new brands of Ayurvedic OTC medicines. The company has taken

up the challenge of growing this new division with a dedicated and enthusiastic team working

on this project.

Among the brands created by the company, today Navratna brand is Rs.200 crore followed by

Boroplus brand standing at Rs.150 crore and Fairness family standing at Rs.55 crore. Sona

Chandi Chyawanprash is number two and Menthoplus and Fast Relief are number two in their

respective categories. In 2006, J B Marketing & Finance Ltd., the erstwhile marketing

company of the Emami Group merged with Emami Ltd. and the total turnover of Emami

including sales in domestic and export market stood at Rs 516 crores at the end of the fiscal

year 2006-07.

While Emami Limited is on lookout for acquisitions in India and abroad for inorganic growth

in FMCG sector, it has also identified ‘Realty’ as another potential business opportunity. A

wholly owned subsidiary, Emami Realty Pvt. Limited, has been formed in May, 2007 to take

up this business. Apart from utilization of Emami’s war chest, it would also give Realty

business an independent and separate focus since it would be a 100 per cent subsidiary of

Emami Ltd. While aggressive growth in FMCG business would continue, Realty would

further enhance profitability and shareholders’ wealth.

With in three decades, the company has grown into a huge Rs. 700 crore Emami Ltd under the

flagship company of the Rs.2000 crore Emami Group.

Today, Emami Limited is lead by Mr. R S Agarwal and Mr. R S Goenka with the help of the

second generation Promoter Directors from the two families. Qualified and dedicated set of

professionals run the day to day operations of the company. Recently a new corporate office

“Emami Tower” has been added to the history of the company which houses Emami Limited

as well as all the other Group companies in Kolkata.

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Emami Group’s expertise also lies in the following fields:

Today, Emami Group is run by Mr. R S Agarwal and Mr. R S Goenka, Joint Chairman, with

the help of the second generation Promoter Directors from the two families and highly

qualified business professionals.

Emami Paper Mills has been rebuilt from the sick unit of Gulmohar Paper Mills and is the

largest paper mill in the Eastern India with manufacturing units in Kolkata and Balasore.

After the current expansion with an investment of Rs 330 crore, it becomes the second largest

newsprint manufacturer in India. Recently Emami has signed a MoA with the West Bengal

Government to come up with Rs 2200 crore paper plant in the state.

CRI limited manufacturing ball point tips is another unit of the Emami Group which has been

consistent winner of the best exporter’s award from the Writing Instruments organization in

India over the last three years. It is the fourth largest tips manufacturing unit in India with

manufacturing units in West Bengal and Gujarat.

Emami and Shrachi Groups together have turned the AMRI Hospitals, originally a

Government Hospital incurring losses into a profitable venture. AMRI is ensuring that people

from the Eastern India need not travel to other parts of the country for medical treatment. 

Frank Ross Ltd, the 100 year old retail pharmacy chain in West Bengal has been acquired and

rejuvenated by adding shops in different localities of Kolkata. An ambitious plan of having a

network of the pharmacy chain all over India has been taken up by the Group now.

Emami Group also has large presence in real estate in West Bengal. South City Project

(Kolkata) Ltd, a joint venture project of Rs 2500 crore is one of the largest real estate project

in Kolkata. Emami Realty has its projects undergoing in Kolkata, Coimbatore and Hyderabad

entailing construction over 50 lakh sq ft.

Starmark, retailing books, stationeries and gift items is one of the biggest retail stores of its

kind in Kolkata with 4 stores and plan for further expansion.

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Emami Biotech Limited has come up with a state-of-the-art 300 tonne-per day bio-diesel

production facility at Haldia, set up at a cost of Rs 150 crore. An additional amount of Rs 100

crore has also been spent at the same facility for producing edible oil of 3 lakh tonnes per

annum capacity. Recently Emami has launched 100% cholesterol free refined cooking oil

‘Healthy Gold’.

Emami also has presence in the field of art. Emami Chisel Art (ECA) the auction house is the

first of its kind in India. ECA is embellished with a characteristic mix of genuine

masterpieces and rare collections from India’s eminent artists as well as contribution from the

new generation contemporary artists.

Emami Group has also signed a MoU for a Cement and Power Plant in Chhattisgarh.

Companies under Emami Group are:-

Emami Paper Mills Limited

Emami Chisel Art

South City Projects (Kolkata) Ltd

Advanced Medicare & Research Institute Ltd (AMRI)

Frank Ross Limited

Emami Realty Limited

Emami Retail Pvt Limited (Starmark)

Emami Biotech Limited

Susruta Clinic & Research Institute for Advanced Medicine Pvt Ltd

Page | 33

EMAMI INTERNATIONAL MARKETING DIVISION (IMD) 

 

Emami IMD reaches out to nearly 60 countries in the CIS, Middle East, Indian sub-continent,

Europe & North America offerings top line Skincare & Personal products, Hair care products

and Ayurvedic Healthcare products in the international markets. 

   

It was established in the 90-s to cater mainly to the demand of Indians settled abroad. The

business has over the years assumed increasing proportions with a phenomenal top line

growth rate of more than 40%. Initially it exported only the brands & products that Emami

marketed in India. Now it caters to varying needs of customers in different countries.

    

Rich Experience in Beauty & Personal Care:

Through intensively researching nature, Emami has excelled in developing a head-to toe line

of beauty and personal care products focused at providing safe and proven solutions to

family’s day-to-day health concerns. Today, Emami markets its products under four brands –

Emami, Himani, Ayucare and Emita, across different categories such as skincare, hair care,

personal care and health care. The Emita Range is aimed at the masses in developing

countries and the Ayucare Range aimed at niche, premium and highly evolved markets. 

Its global portfolio comprises over 40 product ranges made from natural extracts, herbs and

essential oils. These products reflect a prudent combination of Ayurvedic knowledge and

scientific manufacturing processes.

     

Page | 34

Key Brands :

As an international branded consumer goods Company, Emami IMD is clearly focused to

build brands, developing superior consumer insights and finding out how to delight

consumers and offer them brands that are relevant and meet consumer wishes. 

   

The past decade has witnessed enhancement of the Boroplus brand equity in the CIS and

South Asia nations. Boroplus Antiseptic Cream is the market leader in its category in Russia

& Ukraine. The company is also moving towards leadership in cool oil category with

Navratna Cool Oil in Middle East. Fair and Handsome – fairness cream for men is

increasingly growing into a big brand in the Gulf and the Indian sub-continent. 

 

Overseas Offices: 

To strengthen its exports in terms of marketing activities and better penetration and

availability of products, marketing offices in the UK and UAE were established. 

The division is expected to set up offices in Russia and Bangladesh in near future.

Environmental Safety:

Environmental Safety makes the framework of all the activities of the company. They

strongly believe that safety of an individual only will lead to a safer society for the

forthcoming generations and earnestly vouch for that. All the processes, products and

services aims at safeguarding the environment.

Page | 35

CORPORATE SOCIAL RESPONSIBILITY

Emami's mission of a contributing whole heartedly towards the environment and society'

attains a more humane form with its approach of addressing various social issues. As a

responsible corporate citizen, Emami continues to invest in socially meaningful projects in

West Bengal and adjoining states. The company strives to utilize the resources around them

and build a vibrant nation for the people of the country.

As a part of company's Corporate Social Responsibility, Emami has devised various Self

Employment schemes like Emami Mobile Traders and Small Village Shops schemes for the

rural unemployment youth.

An initial trial in West Bengal showed encouraging results leading to financial independence

of women and unemployed youth. The Company has rolled out the schemes to Andhra

Pradesh, Madhya Pradesh, Orissa and Chhattisgarh over last one year. It also plans to

consolidate the activities in more states like Orissa, Madhya Pradesh, Andhra Pradesh and

Chhattisgarh.

Highlights of "Self Employment" scheme

Emami Mobile Traders:

The scheme covers small to large villages with population ranging from 1500 to 5000.

Selected persons are involved in door to door selling of Emami products in interior

villages and depending on their effort and motivation, the monthly earning varies

between Rs 500 to Rs 2000 per month.

On an average they can earn 18% on the sale value of the products. The Company does

not take any deposit from the selected individuals, guaranteeing them a minimum income

of Rs 1000 per month(only if sales of 4000 is achieved) and takes back unsold stocks if

required

Page | 36

Free product samples were supplied for personal use to give prospective consumers a

first-hand experience.

Uniform, raincoats and pullovers and personal accident insurance cover is provided

Emami Small Village Shops

This scheme is being promoted mostly for women in villages where there are no

permanent shops.

The housewives put up the Small Village Shops at their own village residence and

market the Company’s products from their home to the other villagers

The housewives are encouraged to take up this challenge with the help of NGOs and

voluntary workers working in villages

The marketing training given by Emami helps the person to find selling opportunities for

other items manufactured by micro enterprises as well.

Community Medical Support

The Company sponsors subsidized treatment of the needy in best-in-class hospitals like

AMRI and Shree Vishudhanand Hospital and Research Institute in Kolkata. Donations

are made in the form of free supplies of medicines, assistance for surgeries and hospital

charges for the poor through trust. Emami established the 'Emami National Institute for

Bone Marrow Transplantation' in the Narayana Hrudayalaya Institute, Bangalore, under

the supervision of Dr Devi Shetty, the well-known cardiac surgeon. This institute

provides treatment for bone marrow transplantation at free or affordable costs to the

needy.

Page | 37

Emami’s Initiatives

Emami stands to capitalize on the following industry opportunities through the following

initiatives:

Aggressive marketing and distribution:

Emami continues to market its products aggressively. While huge resources are spent

on new launches, existing power brands are marketed through endorsements from celebrities

like Amitabh Bachchan, Shah Rukh Khan, Chiranjeevi, Kareena Kapoor, Govinda and

Dharmendra. Distribution is also being strengthened and new channels of sales are being

established to take care of rural markets and emerging new retail stores.

New product launches:

The Company continues to launch new products like Baby Oil, Boroplus light cream

and lotion, Mr. and Mrs. Black kesh kala, Malai Kesar Cold Cream and Ayurvedic OTC

products like Good Morning (an Ayurvedic laxative churna), Sardi Ja (a cough syrup and

Vaporub) and Memo-plus (a memory booster).

Continuous innovation:

Emami’s strong R&D and aggressive marketing capabilities enable it to identify

emerging needs and aspirations of consumers and convert them into opportunities. Fairness

cream for men, the first of its kind in India and the branding of Chyawanprash as ‘Sona

Chandi’ Chyawanprash are results of such innovative R&D and marketing efforts.

Entry into new segments:

Emami forayed into hair care and baby care segments through the introduction of

products like Mr. and Mrs. Black kesh kala and hair dye powder, and Sona Chandi baby

massage oil. It plans to come out with a full range of male grooming products as well as enter

the baby range category.

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Wider international footprint:

The Company will widen the presence of its Fair and Handsome fairness brand in Asia

and Africa. It will expand the global reach of its Naturally Fair brand in the Middle East and

Asia. It has initiated efforts to globalize its power brands. Boroplus Antiseptic cream is the

largest selling antiseptic cream not only in India but also in Ukraine, Russia and Nepal. Fair

and Handsome is also recently launched in GCC countries and is the number 1 selling

whitening cream for men.

Emami Realty :

While Emami Limited is on the lookout for acquisitions in India and abroad for

inorganic growth in the FMCG sector, it has identified realty as a potential business

opportunity leveraging its resources. A wholly-owned subsidiary, Emami Realty Pvt.

Limited, was formed in May 2007 to drive this business through an independent focus since it

would be a 100% subsidiary of Emami Ltd. While aggressive growth in the FMCG business

will continue, the realty segment will enhance profitability and shareholders wealth.

Product Portfolio:

The Company has a diversified product portfolio, even when the products are Healthcare

Products. It caters to all the people of the society right from children to the Old aged.

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List of products:

Boroplus Antiseptic Cream

Boroplus Light Antiseptic Cream

Boroplus Icy Cool Talc, Icy Sandal

Talc, Pricly Heat Powder

Boroplus Long Acting Body Lotion

Boroplus Triple Action Light

Moisturising Body Lotion

Sona Chandi Chyawanprash

Sona Chandi Baby oil

Sona Chandi Amritprash

Navratna cool Talc

Navratna Extra Thanda

Navratna Lite

Navratna Oil

Himani Pudina Strong

Himani Fast Releif

Emami Hair Life

Emami Fair and Handsome

Emami Malai Kesar Cold Cream

Emami Mentho Plus

Emami Vasocare

Emami Gold 24

Zandu Balm

Gulbahar

Pancharishta Brento

Vigorex tablets

Chandraprabhavati

EMAMI’S SPREAD THROUGHOUT INDIA

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COLGATE-PALMOLIVE

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About the Company:

Colgate-Palmolive Company, The small soap and candle business that William Colgate

began in New York City early in the 19th century is now, more than 200 years later, a truly

global company serving hundreds of millions of consumers worldwide.

The company is 200-year history reflects the strength and innovation that Colgate people

have used to constantly transform our Company and identify new opportunities. With global

brands sold in over 200 countries; Colgate, Mennen, Palmolive, Ajax, Softsoap, and Hill’s

Pet Nutrition are among the world's most recognizable household names, trusted and relied

upon by consumers everywhere.

Colgate People, working around the world, share a commitment to our three core corporate

values: Caring, Global Teamwork and Continuous Improvement. These values are reflected

not only in the quality of our products and the reputation of our Company, but also in our

dedication to serving the communities where we do business.

As a leading consumer products company we are also deeply committed to advancing

technology which can address changing consumer needs throughout the world. In fact, the

company’s goal is to use our technology to create products that will continue to improve the

quality of life for our consumers wherever they live.

As a successful business, we are focused on achieving the consistent growth required to

continue our global success and to make us an even stronger company. We believe this is the

best way to benefit our consumers, our people and our shareholders. The company’s long

history of strong performance comes from absolute focus on our core global businesses,

combined with a successful worldwide financial strategy. This financial strategy is designed

to increase gross profit margin and reduce costs in order to fund growth initiatives and

generate greater profitability.

Mission

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Colgate-Palmolive Company’s mission is to consistently deliver strong business results and

superior returns to stakeholders by providing consumers with the best of their products to

healthier and more enjoyable lives.

Vision

Colgate-Palmolive Company is to become the best among the consumer products by

understanding consumers and consumers’ expectations better and by continually innovating

and improving their products, services ad processes.

Core Values

Colgate-Palmolive’s business operations has always been guided by three core values which

includes caring, global teamwork and continuous improvement.

 Caring

Caring is one of the values that Colgate-Palmolive valued the most. The company cares for

their people especially, their employees, their customers, shareholders and business partners.

The company commits themselves to consistently act with integrity, compassion and honesty,

to respect differences and to respect others opinions and ideas. Also, the company commits

themselves in protecting the global environment and enhancing the communities in which

their business operates.

Global Teamwork

Colgate-Palmolive as a global company works with people around the globe. The Colgate

people works together even though divided with geographical distance throughout the globe

by sharing ideas, technologies and talents in sustaining a profitable growth.

Continuous Improvement

Colgate-Palmolive does their initiative in innovating to be progressively better everyday as a

team and as individual.  

History:

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Colgate-Palmolive Company's growth from a small candle and soap manufacturer to one of

the most powerful consumer products giants in the world is the result of aggressive

acquisition of other companies, persistent attempts to overtake its major U.S. competition,

and an early emphasis on building a global presence overseas where little competition

existed. The company is organized around four core segments--oral care, personal care, home

care, and pet nutrition--that market such well-known brands as Colgate toothpaste, Irish

Spring soap, Softsoap liquid soap, Mennen deodorant, Palmolive and Ajax dishwashing

liquid, Ajax cleanser, Murphy's oil soap, Fab laundry detergent, Soupline and Suavitel fabric

softeners, and Hill's Science Diet and Hill's Prescription Diet pet foods. Colgate-Palmolive

has operations in more than 200 countries and generates about 70 percent of its revenue

outside the United States.

The Start

In 1806, when the company was founded by 23-year-old William Colgate, it concentrated

exclusively on selling starch, soap, and candles from its New York City-based factory and

shop. Upon entering his second year of business, Colgate became partners with Francis

Smith, and the company became Smith and Colgate, a name it kept until 1812 when Colgate

purchased Smith's share of the company and offered a partnership to his brother, Bowles

Colgate. Now called William Colgate and Company, the firm expanded its manufacturing

operations to a Jersey City, New Jersey, factory in 1820; this factory produced Colgate's two

major products, Windsor toilet soaps and Pearl starch.

Upon its founder's death in 1857, the firm changed its name to Colgate & Company and was

run by President Samuel Colgate until his death 40 years later. During his tenure several new

products were developed, including perfumes, essences, and perfumed soap. The manufacture

of starch was discontinued in 1866 after a fire destroyed the factory.

In 1873 Colgate began selling toothpaste in a jar, followed 23 years later by the introduction

of Colgate Ribbon Dental Cream, in the now familiar collapsible tube. By 1906 the company

was also producing several varieties of laundry soap, toilet paper, and perfumes. Colgate &

Company shifted its headquarters to Jersey City in 1910.

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While the Colgate family managed its manufacturing operations on the East Coast, soap

factories were also opened in 1864 by B.J. Johnson in Milwaukee, Wisconsin (under the

name B.J. Johnson Soap Company), and in 1872 by the three Peet brothers in Kansas City,

Kansas. In 1898 Johnson's company introduced Palmolive soap, which soon became the best-

selling soap in the world and led the firm to change its name to the Palmolive Company in

1916. The Peets, who sold laundry soap mainly in the Midwest and western states, merged

their company (Peet Brothers) with Palmolive in 1926, forming Palmolive-Peet Company.

Two years later that firm joined with Colgate & Company to form Colgate-Palmolive-Peet

Company, with headquarters in Jersey City. Palmolive-Peet's management initially assumed

control of the combined organization.

On October 25, 1929, management signed an agreement to merge the company with Kraft

Phenix Cheese Corporation (forerunner of Kraft Foods) and Hershey Chocolate Company.

The three companies would continue to operate independently, but they would become

subsidiaries of a holding company slated to be called International Quality Products

Corporation. Just four days after the deal was signed, however, the stock market crashed,

forcing the huge amalgamation to be scuttled. In the wake of the crash, the Colgate family

regained control of Colgate-Palmolive-Peet and installed Bayard Colgate as president in

1933.

International Expansion

Colgate & Company had been a pioneer in establishing international operations, creating a

Canadian subsidiary in 1913 and one in France in 1920. In the early 1920s the firm expanded

into Australia, the United Kingdom, Germany, and Mexico. Colgate or its successor firm next

created subsidiaries in the Philippines, Brazil, Argentina, and South Africa in the late 1920s.

In 1937 the company moved into India and by the end of the 1940s had operations in most of

South America. By 1939 Colgate-Palmolive-Peet's sales hit $100 million.

In the 1940s and 1950s the company also built upon its strategy of growth by acquisition,

buying up a number of smaller consumer product companies. Organic growth remained on

the agenda as well, and in 1947 the company introduced two of its best-known products, Fab

detergent and Ajax cleanser.

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These acquisitions and new products, however, did little to close the gap between Colgate

and its arch-rival, the Procter & Gamble Company, a firm that had been formed in the 1830s

and had by now assumed a commanding lead over Colgate in selling detergent products in

the United States. Meanwhile, the firm adopted its present name in 1953 and moved its

offices for domestic and international operations to New York City in 1956.

In 1960 George H. Lesch was appointed Colgate's president in the hopes that his international

experience would produce similar success in the domestic market. Under his leadership, the

company embarked upon an extensive new product development program that created such

brands as Cold Power laundry detergent, Palmolive dishwashing liquid, and Ultra Brite

toothpaste. In an attempt to expand beyond these traditional, highly competitive businesses

into new growth areas, Colgate also successfully introduced a new food wrap called Baggies

in 1963. As a result of these product launches, the company's sales grew between 8 and 9

percent every year throughout the 1960s. Sales topped the $1 billion mark in 1967.

Lesch assumed the chairmanship of Colgate, and David Foster became president in 1970 and

CEO in 1971. Foster was the son of the founder of Colgate-Palmolive's U.K. operations. He

joined the company in 1946 as a management trainee and rose through the sales and

marketing ranks both in the United States and overseas.

New Challenges in the Early 2000s

Under Mark's continued leadership, Colgate-Palmolive maintained its momentum into the

early 2000s. By keeping a tight rein on costs, the company boosted its gross profit margin to

54.6 percent by 2002, when net income reached $1.29 billion on sales of $9.29 billion. On the

new product front, the Colgate Actibrush battery-powered toothbrush was brought to market

in 2000, soon followed by products in the burgeoning at-home tooth-whitening sector, such

as Simply White gel and Total Plus Whitening toothpaste. In pet food, the company in 2002

introduced Hill's Science Diet Nature's Best, a new line of premium dog and cat food made

with natural ingredients.

In 2001 it sold its detergent business in Mexico, headed by the Viva brand, to Henkel KGaA,

and then two years later off-loaded its European detergent brands to Procter & Gamble. In

2004 Colgate sold its detergent business in Ecuador and Peru.

In June of that year, the company completed its first major acquisition since the 1995

purchase of Kolynos. Colgate spent $866 million for GABA Holding AG, a privately held

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European oral care company based in Switzerland. GABA, operating in 15 countries, had

annual sales of about $300 million. Its strength in the pharmacy channel complemented

Colgate's leading presence in the European retail market. The addition of GABA boosted

Colgate's share of the European toothpaste market to 33 percent.

Although revenues increased another 7 percent in 2004, topping the $10 billion mark for the

first time, profits fell 7 percent, to $1.33 billion. Intense global competition--particularly from

a resurgent Procter & Gamble--forced Colgate to allocate additional money for advertising,

and the firm also had to contend with increased raw material and packaging costs and the

growing power of discount retailers such as Wal-Mart Stores, Inc. who were forcing

consumer product makers to hold the line on price increases. To free up funds for marketing

initiatives and new product development efforts, Colgate launched a sweeping restructuring

in December 2004, its first major overhaul since 1995. The latest reorganization, a four-year

program, aimed to generate between $250 million and $300 million in after-tax cost savings

by 2008 by closing 26 of the firm's 78 factories around the world and eliminating about 12

percent of the workforce, or more than 4,400 jobs. Cumulative after-tax restructuring charges

of between $550 million and $650 million were anticipated. As part of the restructuring,

further divestments of noncore lines were very possible. As Colgate continued to

deemphasize its detergent business, it seemed likely to seek buyers for its Fab and Ajax

brands. Just as the restructuring began, however, Colgate faced the prospect of an even more

formidable chief foe. Procter & Gamble reached an agreement to acquire The Gillette

Company in January 2005 for $57 billion, which would add Gillette's Oral-B toothbrushes

and toothpastes to P&G's Crest line. This deal was likely to compound the competitive

pressures that Colgate-Palmolive faced, making the successful implementation of the

restructuring that much more important.

Principal Competitors: The Procter & Gamble Company; Unilever; The Clorox Company;

S.C. Johnson & Son, Inc.; The Gillette Company; Johnson & Johnson; Alberto-Culver

Company; Reckitt Benckiser plc; Sara Lee Corporation; Church & Dwight Co., Inc.; The

Dial Corporation.

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FOUNDER’S PROFILE

In 1806, William Colgate, himself a soap and candle maker, opened up a starch, soap, and

candle factory on Dutch Street in New York City under the name of "William Colgate &

Company". In the 1840s, the firm began selling individual bars in uniform weights. In 1857,

William Colgate died and the company was reorganized as "Colgate & Company" under the

management of Samuel Colgate, his son. In 1872, Colgate introduced Cashmere Bouquet, a

perfumed soap. In 1873, the firm introduced its first toothpaste, an aromatic toothpaste sold

in jars. His company sold the first toothpaste in a tube, Colgate Ribbon Dental Cream, in

1896. By 1908 they initiated mass selling of toothpaste in tubes. His other son, James

Boorman Colgate, was a primary trustee of Colgate University (formerly Madison

University).

In Milwaukee, Wisconsin, the "B.J. Johnson Company" was making a soap entirely of palm

and olive oil, the formula of which was developed by B.J. Johnson in 1898. The soap was

popular enough to rename their company after it - "Palmolive".At the turn of the century

Palmolive, which contained both palm and olive oils, was the world's best-selling soap, and

extensive advertising included The Palmolive Hour, a weekly radio concert program which

began in 1927. A Kansas based soap manufacturer known as the "Peet Brothers" merged with

Palmolive to become Palmolive-Peet. In 1928, Palmolive-Peet bought the Colgate Company

to create the Colgate-Palmolive-Peet Company. In 1953 "Peet" was dropped from the title,

leaving only "Colgate-Palmolive Company", the current name.

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External Factors affecting the company:

There are factors that can stimulate changes. One of these sources is external to the

organization. This includes society, political or legal environment and technological

developments.

Society

These changes are affected by the beliefs, values, attitudes, opinions, and lifestyles shift in

society. In the case of Colgate-Palmolive Company, with the increasing changes in

consumers’ preferences and with continuous interests of the consumers to Internet, this

proposes an opportunity to marketing of the company. In consumer products, consumers

dictate the success of the company. The society today is more demanding and is demanding

for quality products and with value to their money. Hence, the trend of organizations today is

to implement changes on their process with the technology.

Political/legal environment

Another source of change is the government’s policies. Colgate-Palmolive Company is

operating in different parts of the globe which would probably face these challenges of

different government policies. With these, the company would likely to change how they

work in each country that would be according to the policies of the government in the country

they operate. Companies such as Colgate-Palmolive are having changes in their process and

how they act in each country to conform to the government policies.

Technological developments

With the rapid change in the technology especially in the communications and transportation,

organizational change would likely to occur. In a global organization, communication and

transportation are of great importance. Colgate-Palmolive is one of the companies that have

gone global. With the technological developments, the company should also be updated their

system to ensure great capability of producing their products and to improve business

processes. The company is already installing their system but with the rapid changes, their

systems is already outdated and needed to install updated systems.

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CORPORATE SOCIAL RESPONSIBILITY

Colgate employees worldwide share a commitment to the three core corporate values: Caring,

Global Teamwork and Continuous Improvement. These values are reflected not just in the

quality of our products and the reputation of our Company, but also in our dedication to

serving the communities in which we do business.

Colgate – Palmolive India undertakes its corporate social responsibility through a variety of

effective programs. Since 1976, the company has been delivering oral health education to

children in rural and urban India in partnership with the Indian Dental Association (IDA).

Colgate’s community outreach efforts have touched the lives of millions of children,

providing the information, insight and inspiration they need for a healthy life and a healthy

smile.

Reading is fundamental:

For the past five years, Colgate in partnership with Pratham, has set up libraries for

the underprivileged children in economically backward areas in Mumbai, to encourage and

inculcate the habit of reading among these children. Colgate firmly believes education will

empower these children for the future and help them to explore new avenues.

Welfare of the local community is an integral part of our values around the world, and we

respect the contribution made by our employees. At the plant in Baddi, our employees

volunteer their time and effort to support community initiatives.

Lending a Helping Hand:

Volunteers demonstrated their commitment to society by creating a safe and protective

environment for the children of the Government Primary and Secondary School in

Jharmajari, HP. They helped in construction of the boundary wall of the school. Entry of

vehicles was restricted in the area, so the children are safe from external dangers and can now

play fearlessly within the school compound. The volunteers also maintain the ecology of the

school premises by maintaining the greenery. Team work of this kind is even more satisfying

when the time and effort invested has made such a difference to the children.

Building Environmental Awareness:

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Every year, our employees at Baddi invite children from the local schools in Jharmajari to

celebrate the ‘Environment Day’. These children are educated to create and sustain healthy

natural outdoor spaces.

Oral Health programme:

To create awareness and promote the importance of good oral hygiene, free dental check ups

were carried out for the children at Kinnaur district. In addition about 15,000 dental health

packs of toothpaste and toothbrushes were also distributed to children. Close to 5000

children' lives have been touched till date, through this programme.

These are a few of the companies initiatives and others include Sponsoring cricket

tournaments, helping to live a life of dignity for HIV infected people and so on.

PRODUCTS OF COLGATE PALMOLIVE

Colgate Total Fresh

Colgate Herbal

Colgate Herbal White

Colgate Whitening

Colgate Fresh Energy Gel

Sparkle

Beauty Soap Palmolive Naturals

Skin Germ Protection Soap - Protex

Bonus

Azadi Dish Bar

Colgate Navigator Plus

Colgate Plus

Colgate Premier

Colgate Extra Clean

Colgate Super Flexible

Max Bar

Max Liquid

Max Antibacterial

Brite Total

Express Power

GILLETTE

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About The Company:

Gillette is a brand of Procter & Gamble currently used for safety razors, among other

personal hygiene products. Based in Boston, Massachusetts, it is one of several brands

originally owned by The Gillette Company, a leading global supplier of products under

various brands, which was acquired by P&G in 2005. Their slogan is, "The Best a Man Can

Get". The original Gillette Company was founded by King C. Gillette in 1901 as a safety

razor manufacturer.

On October 1, 2005, Procter & Gamble finalized its purchase of The Gillette Company. As a

result of this merger, the Gillette Company no longer exists. Its last day of market trading -

symbol G on the New York Stock Exchange - was September 30, 2005. The merger created

the world's largest personal care and household products company. In addition to Gillette, the

company marketed under Braun, Duracell and Oral-B, among others, which have also been

maintained by P&G.

The Gillette Company's assets were initially incorporated into a P&G unit known internally

as "Global Gillette". In July 2007, Global Gillette was dissolved and incorporated into

Procter & Gamble's other two main divisions, Procter & Gamble Beauty and Procter &

Gamble Household Care. Gillette's brands and products were divided between the two

accordingly.

Brand Worth

Some of Gillette’s profit and sales may not have been due to the direct worth of the product,

but due to it being presented to the public from a well-known company. In 1999 Gillette, as a

company, was worth US$43 billion and it was estimated that the brand value of Gillette was

worth US$16 billion. This equated to 37% of the company’s value, which was the same as

DaimlerChrysler, one of the world's largest car manufacturers at the time.

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Promotions

Gillette has a long history of promotions for its products, especially towards young men.

Current promotions include sponsorship of sports events such as the Rugby League Tri-

nations and shipping their then-flagship product (currently the Fusion) to males in the United

States around the time of their 18th birthday. Athletes such as Roger Federer, Tiger Woods

and Thierry Henry also sponsor the company. Also, Gillette provides many promotional

razors to campuses of universities.

Corporate Directors

P&G:

Norman Augustine · Bruce Byrnes · R. Kerry Clark · Scott D. Cook

· Joseph T. Gorman · A. G. Lafley · Charles R. Lee · Lynn M.

Martin · W. James McNerney, Jr. · Jonathan Rodgers · John F.

Smith, Jr. · Ralph Snyderman · Robert Storey · Margaret Whitman ·

Ernesto Zedillo

Brands:

Always · Ariel · Art of Shaving · Aussie · Bounty · Braun · Camay

· Charmin · Cheer · Clairol · CoverGirl · Crest · Downy · Dreft ·

Duracell · Eukanuba · Fairy · Febreze · Folgers · Gillette · Head &

Shoulders · Herbal Essences · Iams · Ivory · Joy · Luvs · Max

Factor · Metamucil · Mr. Clean · Nice 'n Easy · Olay · Old Spice ·

Oral-B · Pampers · Pantene · Pepto-Bismol · Pringles · Puffs · Pur ·

SK-II · Swiffer · Tampax · Tempo · Tide · Vicks · Wella · Zest

GILLETTE INDIA

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Gillette India Limited (GIL) is one of India's well-known FMCG Companies that has in its

portfolio GILLETTE MACH 3 TURBO, ORAL-B and DURACELL - world's leading brands

and has carved a reputation for delivering high quality, value-added products to meet the

needs of consumers.

History:

Incorporated in the year 1985 as Indian Shaving Products Limited, now Gillette India

Limited, its products speak for themselves. The company is always been known for the

strength of its brands, and always continues to penetrate deeper into the hearts of Indian

Consumers.

In the year 1990-91, the company launched two products, first was 7 0'Clock EJTEK PII

Shaving System. This was the First time that a shaving cream was introduced in Indian

markets with special features.

In the year 1992-93, the company launched the first advanced shaving product under the

Gillette brand name Gillette Presto ready shaver all over India. The company earned

distinction of being included for the first time in the top 100 companies in India, in terms of

Market capitalization as published in Business today.

In the year 1995-96, launch of 7 0'Clock Ready II ready shave and re launch of shave cream

in two variants, further strengthened the Brand name. During the year the company also

launched under a distribution arrangement tooth brushes under a well known international

brand name Oral-B, which met good success.

In the year 1998, the company successfully launched the Gillette Series range comprising

Shave gel, Shave Foam, After Shave Splashes, Conditioners and Deodorants, thereby making

it the premier male grooming company. In the year 1999, the company introduced Gillette

Series shave gel tube and Gillette Sensor Excel single cartridge pack, also successfully

launched Cool wave and Wild Rain range of personal grooming products under the Gillette

series line. In the First month of new Millennium, the company launched Gillette Mach 3.

In the year 2000, the company launched successfully Gillette Sensor Excel for women

grooming category, and also launched Pacific Light. It also launched Geep Laserlite, a Sport

Page | 54

flashlight. Company successfully consolidated Duracell and Wilkinson business to leverage

distribution strengths with mega displays and sales promotion.

In the year 2001, the company launched the Gillette Series Arctic Ice Line of products during

the first half and undertook a series of very successful consumer promotions across product

lines. Gillette India was ranked amongst the Top Ten Best Employers of India in Best

Employers of India conducted by Hewitt Associates and Business Today magazine.

In the year 2003, Company successfully re launched Gillette Foam in 4 Variants .Duracell

also launched its Ultra M 3 AA batteries, which was well received by consumers. Oral Care

launched Power Oral Care brushes, which were well received in the market. Towards the End

of 2003, Company launched Gillette Vector Plus.

In the year 2004, the Company launched Storm Force, a revolutionary after shave splash and

New Ultra Comfort Shaving Gel .In the fourth Quarter, Company launched two new Gillette

Series Tube Shave Gel variants, namely for Sensitive skin and Moisturizing, to suit different

skin types.

In the year 2005, Company launched New Improved Gillette Vector Plus featuring all new

contemporary look. The Gillette Company, USA was acquired worldwide through merger in

October, 2005 by Procter& Gamble Company, USA creating the largest Consumer products

Company in the World. In the year 2006-2007, Company launched Gillette Presto Plus for

more discerning consumers. Oral B brand launched Oral B Vision and Kid in Premium

Market Segment.

In the year 2007-2008, Company launched The Gillette Winners program that had sports

legends Roger Federer, Thierry Henry and Tiger Woods and Rahul Dravid. An innovative

program "Free Dental Check up" was organized to enable consumers to benefit from

expertise of professional dentists at no cost. Oral-B brand launched a new variant "Shiny

Clean" targeted at the value segment.

Organization Structure & Future Strategies

Page | 55

Gillette India (GIL) today announced that it would be adopting a new organisational structure

as part of the Proctor & Gamble (USA) acquisition. While Gillette would continue as a

separate legal entity in India, its headquarters will be relocated from Gurgaon to Mumbai.

Managing director, Gillette India, said: “We believe that with GIL remaining a separate legal

entity in India, leveraging synergies from P&G in the areas of organisational structure,

distribution, systems and facilities will help increase our reach, cost-efficiencies, speed to

market and current growth momentum.”

As part of the re-organisation, GIL would adopt P&G’s global business unit (GBU), market

development organisation (MDO) and global business services (GBS) structures. Under the

new GBU, the company will move away from business units based on geographical regions

to units based on product lines. The MDOs will adopt global programmes to suit local

markets and develop market strategies accordingly.

The GBS will bring together business activities such as accounting, human resource systems,

order management and information technology.

As a result of the new structure, GIL would relocate some of its employees to Singapore –

P&G’s regional headquarters. GIL will also transfer some employees to the new headquarters

in Mumbai, and offer VRS packages to others affected by the restructuring. The relocation to

Mumbai would be effective from July 1, 2006. It also hopes to be able to focus on big brands

and move the market faster. The other changes to be effected will be on the distribution front,

where GIL will move from its current distribution structure to P&G distributors.

To synchronise its financial year with P&G, Gillette would also start following the July-June

accounting year and, hence, would extend its accounting year for 2006-07 for January 2006

to June 2007, subject to necessary approvals.

GIL would relocate some of its employees to Singapore, and also transfer a few to the new

headquarters in Mumbai

GIL would move from its current distribution structure to P&G distributors

Thanks to years of innovation and heavy investment in marketing and advertising, Gillette

occupies perhaps the most dominant position of any consumer goods brand in the UK, with

an 85% share of razor-blade sales.

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Common sense might suggest that one would sit back and count the half-billion pounds in

annual revenues this market share delivers. Gillette, however, is owned by Procter & Gamble,

and while even the best marketing company in the world can't improve much beyond that

level of market share, there are plenty of other levers to pull to generate shareholder value.

First, drive profitability. Market share might have reached its zenith, but that doesn't mean

your margins can't be squeezed. One industry insider recently claimed that, despite a pack of

four Fusion razor blades retailing for £9.72, the manufacturing and packaging costs for the

product are less than 30p. That's a whopping mark-up of more than 3000%.

Second, practise positive cannibalisation. Gillette launched its five-blade Fusion line in 2006

with a 30% price premium over Mach 3, its previous three-blade offering. With an 85%

market share, it makes more sense for Gillette to focus its marketing on switching its own

customers from Mach 3 to the more profitable Fusion line than trying to win any more

competitor share. That is why Gillette is spending millions to compete against itself with ads

and online comparisons to convince its Mach 3 consumers that their current razor is simply

not good enough and to trade up to Fusion.

Third, drive usage. This has always been the number-one way to fuel profitability. In

Gillette's case the company is now investing heavily in an online campaign to encourage

consumers to use their Gillette razor downstairs as well as upstairs. Videos with powerful

messages, such as 'When there's no underbrush, the tree looks taller', are increasing blade-use

on the lower body. One of the joys of an 85% share is that you can run general campaigns to

grow total category usage, safe in the knowledge that most of the upturn in sales will benefit

your brands.

Fourth, don't just sit there, extend the brand. Gillette that has meant a successful foray into

the 'software' side of shaving with a 55% share of the UK's shaving-cream category and a

growing slice of deodorants and shampoos, too.

Finally, stay frosty. Today's market dominator could end up tomorrow's has-been brand. The

vast majority of marketing spend in the FMCG world is focused defensively on maintaining

share. It is no surprise therefore that Gillette is one of the brands linked to the hottest TV

series of 2009 - HBO's True Blood

Page | 57

PODUCT PROFILE:

Early Gillette Products

The first safety razors using the new disposable blade, were introduced around 1902. Gillette

maintained a limited range of models of this new type razor until 1938 and the introduction of

the 'Sheraton'. The great innovation of this new model was the 'Twist to Open', or TTO

design, which made blade changing much easier than previously, wherein the razor head had

to be detached from the handle.

1947 saw the introduction of the new 'Super Speed' model, also a TTO design. This was

updated in 1954, with different versions being produced to shave more closely. In 1958, the

first 'adjustable' razor was produced. This allowed for an adjustment of the blade to increase

the closeness of the shave. The model, in various versions, remained in production until 1986.

A companion model, 'The Knack', with a longer plastic handle, was produced from 1966 to

1976.

Older Gillette products

Trac II was the world's first two-blade razor, debuting in 1971. Gillette claimed that the

second blade cut the number of strokes required and reduced facial irritation. The Trac II Plus

is an identical model but adds a lubricating strip at the top of the blade. The blades and

handles are interchangeable.

Atra (known as the Contour in some markets) was introduced in 1977 and was the first razor

to feature a pivoting head, which Gillette claimed made it easier for men to shave their necks.

The Atra Plus featured a lubricating strip, dubbed Lubra-Soft.

Gillette Sensor debuted in 1990, and was the first razor to have spring-loaded blades. The

Sensor for Women was released around the same time and is nearly identical, but has a wider

cartridge head. In 1995, an improved version, the Sensor Excel was released. This featured

"Microfins," a piece of rubber with slits at the top of the cartridge and Gillette claimed this

helped to raise facial hairs, making for a closer shave.

Good News! was the first disposable, double-blade razor - released in 1976. The Good News!

came in three forms: the "original", the "Good News! Plus", which included a lubricating

strip, and the "Good News! Pivot Plus", which featured a lubricating strip as well as a

pivoting head. Blue II is a line of disposable razors.

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Mach3 The first three-blade razor, introduced in 1998, which Gillette claims reduces

irritation and requires fewer strokes. Venus was designed for women and is a Mach 3 variant.

Mach3 Turbo had ten microfins (as opposed to five on the original), a new grip and claims

improved lubrication and "anti-friction" blades. All Mach3 blades are interchangeable

between the three products in the range, so it is possible to use the Mach3 Turbo blades on a

Mach3 razor. The Mach3 Turbo Champion has a slightly different handle design. The Venus

Divine is the Venus version of the Mach3 Turbo. M3Power is a battery-powered version of

the Mach3 Turbo razor which can also be used with the power switched off. The blades differ

from Mach3 Turbo in having what Gillette says is a new blade coating which it describes as

"PowerGlide". The Mach 3 Power Nitro has a slightly different handle design. The Venus

Vibrance is the Venus variant of the M3Power.

The Gillette Fusion is a five-bladed razor released in 2006. There are two different versions

of the Fusion available: the Gillette Fusion, and the Gillette Fusion Power. All share the

characteristic five blades on the front, and a single sixth blade on the rear that Gillette claims

acts as a "precision trimmer". In February 2007, the Fusion Power Phantom (Stealth in UK)

was released and in February 2008, Gillette released another revision, the Fusion Power

Phenom. The Venus Embrace is the Venus variant for women and is also marketed towards

cyclists.

The desire to release ever more expensive products, each claiming to be the best ever, has led

Gillette to make disputed claims for its products. In 2005 an injunction was brought by rival

Wilkinson Sword which was granted by the Connecticut District Court who determined that

Gillette's claims were both "unsubstantiated and inaccurate" and that the product

demonstrations in Gillette's advertising were "greatly exaggerated" and "literally false."

While advertising in the United Stated now had to be rewritten, the court's ruling does not

apply in other countries.

Procter & Gamble shaving products are currently under investigation by the Office of Fair

Trading in an inquiry into alleged collusion between manufacturers and retailers in setting

prices. An industry insider has revealed that the Fusion range of blades, which cost 5p ($0.08)

each to manufacture, sell with a mark-up of more than 4,750 per cent.

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GLAXOSMITHKLINE CONSUMER HEALTHCARE INDIA LTD

Background 

GlaxoSmithKline Consumer Healthcare Ltd (GSK

Consumer Healthcare) is the Indian associate of UK-

based GlaxoSmithKline Plc. GSK Consumer Healthcare

was formed in 1958 by the name of Hindustan Milk

Food Manufacturers Pvt Ltd and promoted by Horlicks

Ltd to provide malted milk foods in the domestic

market. The company acquired its present name in 2002.

The company specialises in manufacturing health food

drinks.

Business Profile GSK Consumer Healthcare produces malted milk food,

biscuits, milkose baby food, powdered milk and ghee

among others. The company’s range of major nutritional

drinks includes Horlicks, Boost, Maltova and Viva.The

company exports to Bangladesh, Myanmar, Sri Lanka,

Middle East, Hong Kong, Malaysia, Fiji and Mauritius.

They have a challenging and inspiring mission: to improve the quality of human life by

enabling people to do more, feel better and live longer. This mission gives us the purpose to

develop innovative medicines and products that help millions of people around the world.

They are one of the few companies researching both medicines and vaccines for the World

Health Organization’s three priority diseases – HIV/AIDS, tuberculosis and malaria, and are

very proud to have developed some of the leading global medicines in these fields.

Headquartered in the UK and with operations based in the US, they are one of the industry

leaders, with an estimated seven per cent of the world's pharmaceutical market.

But being a leader brings responsibility. This means that they care about the impact that they

have on the people and places touched by our mission to improve health around the world.

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It also means that they must help developing countries where debilitating disease affects

millions of people and access to life-changing medicines and vaccines is a problem. To meet

this challenge, they are committed to providing discounted medicines where they are needed

the most. As a company with a firm foundation in science, they have a flair for research and a

track record of turning that research into potheyrful, marketable drugs. Every hour they spend

more than £300,000 (US$562,000) to find new medicines.

They produce medicines that treat six major disease areas – asthma, virus control, infections,

mental health, diabetes and digestive conditions. In addition, they are a leader in the

important area of vaccines and are developing new treatments for cancer.

GlaxoSmithKline Consumer Healthcare Limited manufactures and markets nutritional foods

and beverages, and over the counter drugs primarily in India. It offers malt based foods,

cereal based beverages, baby foods, protein rich foods, malt based foods, biscuits, and ghee

under the Horlicks, Boost, Viva, and Maltova brand names.

The company also provides vending machines for its Horlicks and Boost products for

corporate, school, and hospital sectors. In addition, it offers over the counter drugs, such as

Crocin, a remedy for fever and mild-to-moderate pain; Eno, an antacid for acidity, gastric

discomfort, and heat burn; and Iodex, a balm for back pains and waist pains.

Vision

To work with the spirit and principles of GSK in order to serve the consumers effectively.To

improve the quality of human life,to do more,feel better and live longer.

Mission

The pharmaceutical industry is experiencing a time of unprecedented challenge. Patent

expiries, regulatory issues and increased pressures from healthcare providers have combined

to create an environment where our sector is associated with lotheyr growth and higher risk.

They are addressing these challenges through three key strategic priorities that they believe

will transform GSK into a company that delivers more growth, less risk and an improved

financial performance.

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Words of the CEO- Andrew Witty

GSKCH’s Corporate Responsibility report which provides information on our activity and

performance during 2008.They want to be a company that is forward looking, innovative and

willing to try new approaches and partnerships; a company that is constantly looking for new

and sustainable ways to increase access to our medicines and vaccines, especially for those

least able to pay.

They have made significant progress in helping to address global healthcare challenges. For

example, over the past ten years they have donated over one billion tablets to the programme

to eliminate lymphatic filariasis, a debilitating tropical disease and they are doubling

manufacturing capacity to 600 million tablets a year.

Our commitment to preferential pricing means they offer our AIDS and malaria medicines at

not-for-profit prices in the world’s poorest countries. They also supply our vaccines to

organizations such as GAVI and UNICEF at preferential prices, typically 10-20 per cent of

the prices in developed countries.

But for every success story, there are examples of where they could do more. As I review our

performance, I believe it is time for a new mindset in our industry and a new contract with

society. In these difficult economic times it is a challenge to think beyond short-term

performance. But they must look to the long-term and not be distracted by our own economic

problems when the needs of the developing world remain just as pressing. To begin with,

there are four areas where they can show they are going to do things differently.

First, they are exploring a more flexible approach to intellectual property rights to incentivise

much needed research into medicines for 16 neglected tropical diseases where there is a

severe lack of research. One option is a Least Developed Country (LDC) ‘patent pool’ in to

which they would put our relevant small molecule compounds, process patents or other

knowledge, and which would allow others access to develop and produce new products.

Secondly, on 1 April 2009 they will reduce our prices for patented medicines in the 50

poorest countries in the world, the LDCs, so they are no higher than 25 per cent of the

developed world price. Where possible they will reduce our prices further while ensuring

they cover our manufacturing costs so this offer is sustainable.

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They also recognise the challenge in middle-income countries where there is a wide disparity

in incomes and ability to pay. Here our intention is to work on a case-by-case basis

recognising that there is no ‘one size fits all’ solution to improving access to medicines in

these countries. Thirdly, they will seek out partnerships and open the doors of our developing

world research centre in Spain. They already know what partnership can achieve – for

example, they successfully trialled a malaria vaccine candidate in partnership with the

PATH’s Malaria Vaccine Initiative and the Bill and Melinda Gates Foundation. If they

extend this approach the benefits will be huge.

Fourthly, working with partners such as NGOs, they will reinvest 20 per cent of the profit

they make from selling medicines in LDCs to support the strengthening of healthcare

infrastructure in these countries.

Our sales in LDCs are relatively low so this profit is limited; initially this funding will

amount to £1 to £2 million annually. But by our action they hope to send a signal to all multi-

national companies operating in LDCs to join us and make a meaningful change in these

countries.

In all developing countries they must transform GSK into a local company addressing local

healthcare needs. Our Brazilian business is leading the way – supplying vaccines and sharing

technical expertise to help build local capacity.

They will not forget that significant healthcare challenges exist in developed countries too.

They must work in partnership to create a virtuous circle, where industry gets rewarded for

demonstrating genuine innovation.

Healthcare payers get value-for-money because our medicines save them from high-cost

healthcare interventions, and more patients get the medicines they need.

Of course, access to medicines is not the only issue that counts. They want GSK to be

recognised around the world - by all stakeholders - as a company with the highest ethical

standards.

They made good progress in 2008. They committed to stopping all corporate political

contributions from 2009. Our decision to report more fully on our funding for medical

education, patient groups and payments to physicians, will increase transparency and provide

reassurance to stakeholders.

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Reflecting our commitment to animal theylfare, they took a voluntary decision to end

research in great apes, the highest-order of animals next to humans.It is time for a new

mindset in our industry and a new contract with society. With the support of other

pharmaceutical companies and partners outside the industry, I believe significant

improvements in human health can really be achieved.

Management

The company is managed by the Board of Directors and the Corporate Executive Team.

The Board is comprised of executive and non-executive directors who are responsible for our

corporate governance and ultimately accountable for our activities, strategy and performance.

The Chief Executive Officer (CEO) is responsible for the management of the business and is

assisted by the Corporate Executive Team that manages our activities. Each member is

responsible for a specific part of the business

Strategic priorities

In 2008, they established the following three strategic priorities:

Grow a diversified global business

Deliver more products of value

Simplify the operating model

They believe these priorities will enable us to navigate the coming years successfully and

retain our leading-edge position as a company able to meet patients’ and healthcare

providers’ needs into the future.

Consumer Healthcare Products

Vitamins and naturals, weight loss , oral healthcare, BC Powder, pain relief, Beano vitamins

and naturals, allergy treatment and medicines for cold and flu, oral healthcare analgesics and

respiratory tract and nutritious drinks like horlicks,boost, milo,etc.

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Work with Community and Global Programmes

They will make a positive contribution to the communities in which they operate, and invest

in health and education programmes and partnerships that aim to bring sustainable

improvements to under-served people in the developed and developing world.

They provide money, medicines, time and equipment to non-profit organisations to help

improve health and education in under-served communities.They focus on programmes that

are innovative, sustainable, and bring real benefits to those most in need. Global health

programmes .In communities around the world, people affected by certain diseases face

stigma and discrimination, disability and a vicious cycle of ill health and poverty.

In the developing world, diseases that can be prevented, managed or cured cause significant

suffering and mortality due to a lack of basic knowledge and inadequate health services.

They support activities to tackle these diseases through donations of medicines, financial and

practical support. They have chosen to focus our efforts on lymphatic filariasis (LF),

HIV/AIDS and malaria as theyll as diarrhoea-related disease in children. Every year more

than two million people die of diarrhoea-related disease, mostly children in developing

countries. These deaths can often be easily prevented through better hand washing and

sanitation.

Established in 1988, PHASE is a low-cost education programme helping to reduce diarrhoea-

related disease by encouraging school children to wash their hands.PHASE currently operates

in eight countries - Bangladesh, Kenya, Uganda, Zambia, Nicaragua, Peru, Mexico and

Tajikistan- reaching more than 375,000 children and their extended families.

Research & development

From molecules to medicines,scientists are working hard to discover new ways of treating

and preventing diseases.

Our success depends on a vibrant and productive R&D function. To this end, they have

established an innovative R&D structure that encourages creativity and facilitates the

accelerated discovery and development of new medicines.

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External collaborations

They also build collaborations and links with other research groups, biotechnology

companies and academic institutions to help develop transformative scientific concepts.

R&D organization

They have a large and promising development pipeline, due in the main to the innovative

R&D organization, which concentrates research in key areas through our Centres of

Excellence of Drug Discovery (CEDDs).Our CEDDs are focused on five therapeutic areas:

Infectious disease

Metabolic pathways

Neurosciences

Respiratory

Strategies

They have set out three new strategic priorities that aim to increase growth, reduce risk and

improve GSKCH’s long-term financial performance:

1. Grow a diversified global business

2. Deliver more products of value

3. Simplify GSKCH’s operating model

Achievements

Corporate and individual responsibility award

Recognized for building trust in the community, internationally

Human rights campaign foundation

Initiative and innovation award in 2007

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Announced Policy Change

In February of 2009, GSK head Andrew Witty announced that the company will reduce all

drug prices to 25% Western prices in the 50 least developed countries.

Released intellectual property rights for substances and processes relevant to neglected

disease into a patent pool to encourage new drug development, and invest 20% of profits

from the least developed countries in medical infrastructure for those countries.

The decision has received mixed reactions from medical charities. Medicines Sans Frontiers

welcomed the decision, encouraging other companies to follow suit, but criticized GSK for

failing to include HIV patents in their patent pool, and for not including middle-income

countries in the initiative.

Corporate social responsibility

The company is involved in various development initiatives all over the globe. The

company's flagship community programme is its key role in the global alliance to eliminate

lymphatic filariasis, one of the most disfiguring and disabling disease prevalent in the world

today. In India too, the company has been committed to social and health related activities

since 1977. The company has initiated various development programmes by building

effective partnerships with local NGOs, governments and communities. These initiatives are

implemented through coordinated projects on urban community development, rural

development, disaster relief, workplace initiatives and medical fraternity initiatives.

GSK India's Current Projects

 GAVS, a Trust promoted for the development of rural masses Gramin Arogya Vikas Sanstha

(GAVS) is a registered public trust promoted by Glaxo in April 1997. The Trust operates in

three needy, predominantly tribal villages, 55 kms away from GSK's factory at Nashik. The

Trust aims at fulfilling basic healthcare, education and other developmental needs of the

villagers.

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GAVS organises:

weekly medical check-ups and treatment by qualified doctors

preventive health awareness programmes using audio-visuals besides running a

small savings scheme for women and the youth.

Training programmes in health, midwifery are also being conducted by the

organisation.

All programmes are implemented through a full-time trained social worker, under the

guidance of four trustees (all GSK management staff) who periodically visit the

project and provide their time, professional skills and expertise towards its activities.

Through constant interaction, the full-time social worker has built an excellent rapport

with the villagers and the local and district governmental functionaries. As a result of

continuous follow-up by the Trust, a major drinking water supply scheme has been

implemented last year in one of the drought-prone villages by the local government

authorities.

 The Trust has been recently able to get the State Public Department's approval of

establishing a Sub-Primary Health Centre in this village. This centre, costing about

Rs. 45 lakhs (approx. £ 65407), would be established by the district government

authorities as a result of the Trust's periodic follow-up for the last four years.

SSSS,a Trust Working For Disadvantaged Slum Children in Mumbai

Shishukalyan Snehi Swayamsevak Sanstha (SSSS) -- meaning ''a voluntary

organisation for Child Welfare'', is a charitable trust promoted by Glaxo India

employees in 1979 for the development of financially disadvantaged children -

deprived of opportunities such as basic education, healthcare and recreation. The

SSSS operates in the slums of Worli Koliwada, a fisher folk community, located near

the company's head office in Mumbai. The SSSS runs a Medical Care Centre which

provides comprehensive health check-up and treatment.

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Nutritional Supplements Scheme for children at a preprimary education centre and an

Educational Sponsorship Scheme for needy girl students of a local school. The

programmes are implemented by a full-time trained social worker, under the guidance

of a Managing Committee which has representatives of GSK and leading voluntary

organizations in Mumbai.

Glaxo AIDS helpline As a unique and innovative initiative for counselling and

dissemination of information on HIV/AIDS to the lay public in Mumbai, the company

launched a 24 hours phone-in helpline in October 2000. Highly trained and

experienced team of counsellors answer thousands of callers from 10 a.m. to 9 p.m.

Thereafter, the callers can obtain basic information on issues related to HIV/AIDS

through a comprehensive Interactive Voice Response that is operational from 9 p.m.

to 10 a.m., available in two local languages besides English. The helpline focuses on

various aspects related to general awareness, prevention, treatment and care, psycho-

social support for HIV positive people and their families.

The helpline provides immediate, complete and factual information to the general

public. It is aimed at addressing various existing myths, misconceptions and

prejudices related to issues on sexual and HIV/AIDS in an atmosphere of anonymity

and confidentiality. The highly trained staff provide counselling, further referrals if

needed.As on March 31, 2003, around 25,000 phone calls have been answered by

the Glaxo AIDS helpline, adjudged as one of the best professionally managed

helplines by several leading bodies like the Tata Institute of Social Sciences.

Supporting mentally challenged children

Providing infrastructure to local skills

Page | 69

EMAMI

Strengths:

Diversified business and product portfolio. Brand ambassadors: Besides Amitabh and Shah Rukh, other celebrity endorsers of

Emami’s brand include Madhuri Dixit, Kareena Kapoor, Govinda, Sourav Ganguly, Chiranjeevi, Surya and Upendra among others.

Himani Ayurveda Science Foundation that helps Emami in R&D. Continuous Innovation and market research Timely introduction of new products. The Policy of partner and progress presents a strong image of the company to its

stakeholders and customers. Fair dealings.

Weakness:

Small Product portfolio.

Low Brand Awareness

Opportunities:

Expansion by introduction of new products.

Innovation in existing product lines and Diversification.

Introduction of new schemes like the Self Employment Scheme.

Threats:

Competition by existing and new firms.

Government regulations

Slowdown in the FMCG sector or the economy on the whole.

Rise in Price of raw materials.

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COLGATE-PALMOLIVE

Strengths:

Strong financial performance Focus on innovation and new product launches Colgate business planning initiative

Weakness:

Product recalls Highly leveraged

Opportunities:

Emerging markets growth Deploying advance technologies Growing Hispanic population in the US Specialty pet nutrition growth

Threats:

Competitive landscape from other CPGs Private label growth Increasing commodity prices Falling consumer confidence in the US

GILLETTE

Page | 71

Strengths:

• First mover advantage and 97% Brand Awareness

• 48% market share and increase in Sales.

• Established international manufacturing, wholesalers, retailers and agents

• Has 90% of the Indonesian premium priced segment market

• Consistently profitable for the last 5 years

• Increase in the number of individuals with a disposable income

• 7% GDP growth for past 20 years under Replita plan

• Company management supports geographic expansion, R&D, advertising and capital

spending as drivers for growth

Weaknesses:

• Inability to meet the demand in the upcoming year, until new capacity.

• Suboptimal product mix leading to product cannibalization- too much diversification

• Four times higher price than competitors - some of the target customers cannot afford

Opportunities:

• Reduction of competitors due to bankruptcies of retailers due to low-price gouging war

• Increased demand for higher end, higher margin products

• Percentage of population earning >$10,000/year increasing rapidly

• 40% of the higher income group shop in supermarkets

• 60% of shavers are currently shaving with knives rather than competitor products- room for

new customer acquisition

• Room for additional revenue through the potential to sell more shaving product - 4% men

use shave lotion and 58% shave dry

• Small kiosks and mom & pop shops requesting product from wholesalers

Threats:

The major threat is that it cannot cater to the demands of the common man, thereby

having less sales and inability for the survival in the future.

Another major threat is from the competitors.

Not a good growth rate, hence it might not be able to cope up with its competitors.

GLAXOSMITHKLINE CONSUMER

Page | 72

Strengths:

The group operates primarily in 117 countries

Products are sold in over 140 countries.

Recorded revenues of £22,716 million

Weakness:

Employs huge number of employees(103000)

Limited variety of different segments of products

Less of company know-how to people

Oppourtunities:

Expansion of business and advertisements

New variety of products

Better management of human resource

Threats:

Competition from competitors

Launching of new products in market pose a danger

EMAMI

Page | 73

Shared Values:

The values of the company are strong which has lead to its growth over the time.

“Making people healthy and beautiful, naturally” is its core value. The company aims at

contributing whole heartedly towards the environment and society integrating all the

stakeholders into the Emami family.

Its other values are:

To make Emami synonymous with natural beauty and health in the consumers mind

and to effectively manage talents by building a learning organization.

To drive growth through quality and innovation in products and services and to

uphold the principles of corporate governance.

Commitment and loyalty to institutional values and principles

Customer Orientation

Social Responsibility

Environmental Safety 

Strategy

Emami Limited is one of the fastest growing ayurveda-focused, health, beauty and personal

care product companies in India today. Through the efforts of a team of committed and

competent personnel, the company strives for continual improvement in their quality

performances.

Emami is planning to take on Johnson and Johnson in the baby products arena with a two-

pronged strategy which hinges on working out a right pricing formula on the one hand and

marketing products based on ayurveda on the other.

Starting with an entry in the southern markets, Emami, which has under its belt, brands like

Navratna, Boroplus and Zandu, is planning to add to its portfolio of three baby products that

it has now launched — soap, oil and talc, while creating price-points which the company

hopes will expand the market. A national roll-out is planned by September.

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The company is also planning to expand the product-base with creams, lotions and shampoo

with medicinal products like gripe-water coming in the next phase.

Emami is planning to beat the slowdown in the economy with its winter care products from

which it is targeting a Rs. 200 crore turnover, these products are expected to contribute 30 per

cent of the company’s turnover. The company planned an investment of between Rs. 60 crore

and Rs. 80 crore on advertising and brand promotion.

The company plans to reach an additional 15 lakh households, through door-to-door activities

and promotions. Emami has recently entered niche categories, petroleum jelly and glycerin

soap. It is also looking at strengthening its foothold in the over-the-counter (OTC) segment

with the launch of a cough syrup.

Structure:

The structure is very formal with Board of directors at the top of the hierarchy followed by

the other managers and executives. The decisions relating to company’s growth and various

strategies are taken by the Top level managers after consulting the Board of Directors. It

follows the conventional top down hierarchy with Board of Directors on the top followed by

the Chief Officers like CEO, CFO, COO and so on. These Chief Officers are followed by

Head Managers like Marketing Manager, H.R Manager and so on, under whom branch

managers perform their tasks.

Board of Director's:

Founders:

Mr R S Agarwal, Executive Chairman, is a Chartered Accountant, Company Secretary and

LLB. He is an eminent industrialist with experience in strategic planning, corporate affairs

and finance.

Mr R S Goenka, Director, is an M Com and LLB with expertise in taxation, strategic

planning, corporate affairs and finance.

Mr S K Goenka, Managing Director

Mr Viren J Shah, Director

Mr K N Memani, Director

Mr K K Khemka, Independent Director

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Mr S N Jalan - Independent Director

Mr S K Todi - Independent Director

Mr Vaidya S Chaturvedi, Independent Director

Mr Mohan Goenka, Wholetime Director

Mr Aditya V Agarwal, Wholetime Director

Management Team:

Mr N Venkat, CEO and ED

Mr N H Bhansali, CFO and President

Mr Shyam Sutaria, CEO – IMD

Mr Saroj Chakraborty, CEO - Foods Division

Mr R K Surana, President - Operations and Commercial

Mr Krishna Mohan, President – Sales

System

Emami is investing in its future by further building integrity into its information systems. It

has implemented SAP. With the implementation, the following benefits are in the process of

being accrued:

Standardized Work Processes

Emami is a global company, offering a diverse portfolio of products to markets in more than

58 countries. With the SAP implementation, the Company will be able to manage their entire

global supply chain more efficiently, enabling them to make the best possible business

decisions ranging from capacity planning to production scheduling. This is also helping them

to reduce the amount of time and effort it takes to fulfill customer requests and transactions.

Having a robust, online transactional system with a single data base the company can analyze

and evaluate their global inventory.

Improved Timeliness

Operational efficiency to respond quickly to fast changing market realities is a strength built

in their IT department.

Strengthen Relationships

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Companywide access to accurate information about customers, production and distribution

will form the backbone of the customer care concept-ultimately integrating disparate touch

points, raising the quality of customer interactions, and focusing business processes across

the enterprise around customer needs. Business process will streamline and automation across

all locations.

Accuracy of Information

This new system will serve as a repository of information and allow the Company to build

accurate customer profiles based on the products we sell and the services we offer. The

business information system enables them to gather, store, analyze, and provide easy access

to the most up-to-date information available—all updated in real-time. It also helps in

Enhanced management control and online user-friendly management reporting.

Staff

At Emami exciting, challenging and satisfying career is promised, derived from professional

and personal progress, sincerity and dignity. They attempt to recruit a varied group of highly

qualified and dedicated people, and offer them opportunities to bring out their finest. A career

at Emami lets a person to work with most competent professionals on some of the power

brands in the personal and healthcare industry. The Company believes that talented

professionals are the most valuable resources for significant growth.

Working at Emami means to learn and grow continuously. They look out for highest ethical

principles apart from technical skill. The company believes their achievement depends

wholly on the creativity, performance and success of our associates at all levels. Challenge,

innovation, teamwork and knowledge are of high priority in the organization

Style:

The company has a unique style of working. It comprises of various attributes that needs to

be developed and followed in the day to day working of the Organization. A few of them are

listed below:

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Commitment & Loyalty to institutional values and principles

A strong sense of ownership and commitment towards the organization and the business as a

whole is the basic premise of all actions. The human dignity and worth of an individual is

acknowledged and maintained at all times.

 

Integrity

This is cherished above all within the organization and whatever said, done, and the way they

do it, will emphasize integrity and dependability. The Company practices integrity in its real

sense in all personal and business actions

Attention to detail

Utmost importance is given to attention for details in all the activities. It is the diligence

which provides them with the competitive edge and also ensures quality in all their activities.

Teamwork & Team-oriented Environment

Teamwork is the cornerstone of business that helps deliver value to the customers. They work

together across titles, jobs and organization structure to share knowledge and expertise for the

growth of the individual and the organization. An environment which would foster teamwork,

cooperation and an urge to utilize knowledge and information is made available.  

Simple living, High thinking

As an organization it will imbibe the principles of leanness and agility of a small organization

and discourage extravagant expenses in all their dealings and strive towards becoming an

organization worth emulating.  

Skill:

The skill required differs from job to job. The company recruits employees with high

technical and conceptual skills. Various steps are taken to ensure that the best of the talent is

acquired and retained. Management skills, Leadership skills, Decision making and problem

solving ability are a few of the skills required in the company. Moreover Emami believes in

recruiting employees who love to undertake challenging tasks, complicated situations and

ready to face anything that comes their way.

Page | 78

COLGATE-PALMOLIVE

Strategy:

(1) Getting closer to consumers, the profession and our customers;

(2) Driving innovation throughout all areas of our business;

(3) Increasing effectiveness and efficiency everywhere

(4) Strengthening leadership worldwide.

Alignment of the company goals and strategies with those of the company retail customers is

another critical component of the company business strategy. One new initiative rolling out

globally fosters the joint development of commercial plans that align both the customer's and

Colgate's strategic priorities and business goals.

Colgate has developed global commercial selling principles that apply to the company

relationships with all customers, regardless of their size or location. These principles provide

specific guidelines on how to achieve business goals while maintaining Colgate's

commitment to its values and to upholding the highest ethical standards in its business

dealings.

Another global initiative, Colgate Business Planning (CBP), a fully integrated commercial

planning and execution discipline, from the budget process through to the store-shelf, is

accelerating profitable growth by contributing to higher market shares, net sales and margin

growth

Underlying the company success is a strong focus on innovation throughout all areas of the

company business from new product development to the supply chain to all business

functions and processes. The number of marketing professionals dedicated full time to new

product development has increased by more than 50% in the past of the company years.

Additionally, we have reorganized the research and development function into dedicated

teams focused on specific elements of the innovation process. These include conducting early

research, seeking external innovation opportunities, developing products that combine

consumer needs with technology, and global implementation support for quality execution.

Page | 79

Structure:

The structure is very formal with Board of directors at the top of the hierarchy followed by

the other managers and executives. It follows the conventional top down hierarchy with

Board of Directors on the top followed by the Chief Officers like CEO, CFO, COO and so

on. These Chief Officers are followed by Head Managers like Marketing Manager, H.R

Manager and so on, under whom branch managers perform their tasks.

Board of Directors :

Ian Cook -Chairman, President and Chief Executive Officer

John Cahill -Former Chairman and CEO, The Pepsi Bottling Group, Inc.

David Johnson -Chairman Emeritus of Campbell Soup Company

Richard Kogan -Former President and Chief Executive Officer of Schering-Plough

Corporation, 1996-2003

Delano Lewis -Senior Fellow, New Mexico State University, since 2006    

J. Pedro Reinhard -Former Executive Vice President and Chief Financial Officer of

The Dow Chemical Company

Management Team:

Ian.M.Cook-Chairman And CEO

Michael J. Tangney -Chief Operating Officer

Stephen C. Patrick-Chief Financial Officer

Andrew D. Hendry-Senior Vice President,

Systems:

Strengthening relationship among employees, suppliers and retailers

Create a “Design Win” calculator and more efficient process for accepting orders

Define the “sales process” model? Identify and communicate expectations to all sales

personnel

Style:

Page | 80

Colgate works with the core style of strengthening Leadership worldwide. It includes

essential values such as inspiring leadership in everyone, acting courageously, providing a

strategic perspective, building a collaborative environment and delivering outstanding results.

It also has increased visibility of leadership through establishing regular staff meetings and

implementing leadership development program for directors and managers

Staff:

It has over 36000 dedicated employees who help the company in achieving its goals. The

employees have their goals aligned with that of the company resulting in increased efficiency.

It is ensured that employees are competent and dedicated along with being responsible.

Skills:

The company looks for talented professionals who have their objectives in line with their

objectives. Employees with critical reasoning and good communication along with integrity

are the ones most preferred.

Shared Values:

The Company’s mission is to consistently deliver strong business results and superior returns

to stakeholders by providing consumers with the best of their products to healthier and more

enjoyable lives and aims to become the best among the consumer products by understanding

consumers and consumers’ expectations better and by continually innovating and improving

their products, services and processes.

Colgate-Palmolive’s business operations have always been guided by three core values which

includes caring, global teamwork and continuous improvement.

GILLETTE

Page | 81

Strategy:

Create and implement improved sales process and sales skill/tool improvement

program

Work with the sales team to create and communicate a stronger value proposition for

selling products; Use CEO to help communicate it.

Increase the focus on Global Account Manager role including role clarity and

training.

Implement CRM (customer requirements management) tool to increase sales team

effectiveness

Structure:

Redefine role of Global Account Manager (GAM)

Identify compensation structure for GAM

Define and communicate the career paths for each sales job function

Change organization structure so that FAE become part of separate team structure

Systems:

Create a “Design Win” calculator and more efficient process for accepting orders

Define the “sales process” model? Identify and communicate expectations to all sales

personnel

Develop clearer employee policies in areas such as auto and travel expenses

(especially for Europe)

Develop the needed infrastructure (comp, benefits, payroll, etc.) for Asia sales

Make gross margin bonus an element of the 2004 commission plan

Style:

Page | 82

Increased visibility of leadership through establishing regular staff meetings Implement

leadership development program for directors and managers

Staff:

Hire Customer GAM

Hire FAE in Europe

Skills:

Validate the needed GAM skills and test for those among existing team

Increase the team’s skills and willingness to use the new CRM tool & processes

Increase sales management

Train sales staff in the “sales process” model

Increase technical knowledge of products and technologies

Improve sales team’s skills in building customer relationships

Shared Values:

Instill the value that each AM and GAM is an independent business person who can

demonstrate their value to the organization and manager their own business

GLAXOSMITHKLINE CONSUMER

Page | 83

Structure:

It follows a hierarchical structure headed by the board of directors followed by the chief officers and the functional heads.

1. Redefine role of Global Account Manager (GAM)

2. Identify compensation structure for GAM

3. Define and communicate the career paths for each sales job function

4. Change organization structure so that FAE become part of separate team structure

Chairperson- SJScarff Managing Director- ZAhmed Directors - A Dayal, R Subramanian, K Kashyap, Dwarakanath, P Murari, P K Gupta

Staff:

1.Hire Customer GAM

2.Hire FAE in Europe

Systems:

1.Create a “Design Win” calculator and more efficient process for accepting orders

2.Define the “sales process” model? Identify and communicate expectations to all sales personnel

3.Develop clearer employee policies in areas such as auto and travel expenses (especially for Europe)

4.Develop the needed infrastructure (comp, benefits, payroll, etc.) for Asia sales

5.Make gross margin bonus an element of the 2004 commission plan

Style:

Increased visibility of leadership through establishing regular staff meetings Implement leadership development program for directors and managers

Strategy:

Page | 84

1.Create and implement improved sales process and sales skill/tool improvement program

2. Grow a diversified global business

2. Deliver more products of value

3. Simplify GSKCH’s operating model

Skills:

1.Validate the needed GAM skills and test for those among existing team

2.Increase the team’s skills and willingness to use the new CRM tool & processes

3.Increase sales management

4.Train sales staff in the “sales process” model

5.Increase technical knowledge of products and technologies

6.Improve sales team’s skills in building customer relationships

Shared Values:

Instill the value that each AM and GAM is an independent business person who can demonstrate their value to the organization and manager their own business

Yearly Financial Comparison (2008):

PARTICULARS EMAMI COLGATE- GILLETTE GLAXO SMITHKLINE

Page | 85

PALMOLIVE INDIA CONSUMERSales Turnover 583.71 1,473.38 588.84 1,592.30Other Income 2.66 84.78 19.13 45.96Total Income 586.37 1,558.16 607.97 1,638.26Total Expenses 487.69 1,244.83 426.25 1,305.26Operating Profit 96.02 228.55 162.59 287.04

Profit On Sale Of Assets

-- -- -- --

Gain/Loss On Foreign Exchange

-- -- -- --

Other Extraordinary Income/Expenses

-- -- -- --

Total Extraordinary Income/Expenses

-- -- 14.45 --

Tax On Extraordinary Items

-- -- -- --

Net Extra Ordinary Income/Expenses

-- -- -- --

Gross

Profit

98.68 313.33 181.72 333.00

Interest -13.53 1.44 -- 6.97PBDT 112.21 311.89 196.17 326.03Depreciation 7.28 19.84 13.98 41.95Depreciation On Revaluation Of Assets

-- -- -- --

PBT 104.93 292.05 182.19 284.08Tax 12.18 60.34 64.82 95.75Net

Profit

92.75 231.71 117.37 188.33

Depreciation for Previous Years Written Back/ Provided

-- -- -- --

Dividend -- -- -- --Dividend Tax -- -- -- --Earnings Per Share 14.92 17.04 36.01 44.78Book Value -- -- -- --Equity 12.43 13.60 32.59 42.06

Page | 86

Reserves 276.57 148.61 -- --Face Value 2.00 1.00 10.00 10.00

Competition:

Name Of The Company

Last Price Market Cap.(in Rs)

Sales Turnover

Net Profit Total Assets

Colgate 617.55 8,398.24 1,770.82 290.22 220.98

Gillette

India

922.90 3007.29 588.84 117.37 425.40

Emami 390.15 2,424.59 651.01 67.36 324.20

GlaxoSmithKline Consumer

1,032.65 4,342.87 1,592.30 188.33 646.36

The above data is as 26.08.09

Comparison:

Particulars Emami Colgate-Palmolive Gillette India GlaxoSmithKline

Type of Company Public Public Public Public

No of Products 40+

BSE group S A B B

Brand Recognition Medium High High Medium

EPS* 9.36 23.61 32.21 53.43

Dividend Yield (%)*

1.15 2.43 1.36 1.17

*As per latest stand alone adjusted profit.

Page | 87

Company Share Vs Sensex:

GlaxoSmithKline Consumer Healthcare

Page | 88

Emami:

Emami focuses on ayurvedic products backed by modern manufacturing technology. Its scrip

was recommended by analysts in October 2008 at 18 times its TTM earnings when it was in

process of acquiring Zandu Pharmaceutical Works.

The acquisition is now complete—Emami paid around Rs 750 crore to buy a 72 per cent

stake in Zandu. The amount seems large compared with Emami’s Rs 650-crore annual

revenue in FY09. However, the acquisition will add value to the company in the long run.

Colgate-Palmolive:

It undertakes marketing initiatives at regular intervals to increase consumption of oral care

products, which has helped it sustain growth in both rural and urban areas. On yearly basis,

sales growth averaged 15 per cent and the average profit growth was 20 per cent.

The company’s scrip was priced at 24 times its trailing 12 months’ (TTM) earnings, which

was a bit higher than the April 2008 level. Along with the price rise, the company should be

able to maintain high growth in its earnings in the future.

Gillette-India:

Gillette’s business seems shielded from the effects of the downturn. Its male grooming

products, including razor blades, reported a revenue growth of around 14 per cent y-o-y. The

oral care segment grew robustly at 59 per cent. The relatively smaller segment, portable

power, grew at a healthy 19 per cent. Overall, the company’s net sales and profit grew at 22

per cent and 27 per cent, respectively. Its EPS has also come down.

GlaxoSmithKline Consumer:

In the March quarter, the company registered a sales growth of 31.28 per cent, while net

profits were up 48.35 per cent, which was above industry expectations. The company also

improved its operating margin in the March quarter to 25.54 per cent against 18.01 per cent in

the previous quarter.

During the March quarter, the company added two products to its portfolio—Horlicks

Nutribar and Actigrow. Also, Boost is the official energy drink of Rajasthan Royals in the

Page | 89

Indian Premier League (IPL).Also, at the end of 2008, the company had cash in excess of Rs

470 crore, which can be used for expansion or for disbursing higher dividends.

Balance Sheet Comparison:

---------- in Rs. Cr. -----------Particulars Emami Colgate Gillette

IndiaGlaxoSmithKline

ConsumerMar’08 Mar’09 Jun’08 Jan’08

Sources Of Funds

Total Share Capital

12.43 13.60 32.59 42.06

Equity Share Capital 12.43 13.60 32.59 42.06Share Application Money 0.00 0.00 0.00 0.00Preference Share Capital 0.00 0.00 0.00 0.00Reserves 276.57 202.70 392.82 604.29Revaluation Reserves 0.00 0.00 0.00 0.00Networth 289.00 216.30 425.41 646.35Secured Loans 35.19 0.00 0.00 0.00Unsecured Loans 0.00 4.69 0.00 0.00

Total Debt35.19 4.69 0.00 0.00

Total Liabilities

324.19 220.99 425.41 646.35

Emami Colgate Gillette

India

GlaxoSmithKline Consumer

Mar'08 Mar '09 Jun '08 Jan '08Application Of FundsGross Block 105.73 425.26 253.08 523.68Less: Accum. Depreciation 27.91 251.33 161.89 297.65Net Block 77.82 173.93 91.19 226.03Capital Work in Progress 13.47 4.67 3.00 17.31Investments 102.97 38.33 0.00 297.84Inventories 40.10 82.42 103.20 194.82Sundry Debtors 34.03 11.13 64.35 27.36Cash and Bank Balance 2.77 43.69 4.38 32.17

Total

Current Assets

76.90 137.24 171.93 254.35

Loans and Advances 156.01 232.48 280.01 62.15Fixed Deposits 0.04 207.45 72.06 61.50

Total CA, Loans & Advances

232.95 577.17 524.00 378.00

Page | 90

Deferred Credit 0.00 0.00 0.00 0.00Current Liabilities 56.21 411.93 138.91 243.65Provisions 46.80 161.19 53.88 29.17

Total CL & Provisions

103.01 573.12 192.79 272.82

Net Current Assets

129.94 4.05 331.21 105.18

Miscellaneous Expenses 0.00 0.00 0.00 0.00

Total

Assets

324.20 220.98 425.40 646.36

Contingent Liabilities 26.45 46.46 205.06 7.03Book Value (Rs) 46.50 15.90 130.55 153.69

Share Holding Pattern:

Particulars Emami Colgate-Palmolive

Gillette India

GlaxoSmithKlineConsumer

Indian promoters 82.87 - 47.71 -

Foreign promoters 4.97 51.00 41.02 43.16

Acting person - - - -

Other promoters - - - -

MFs/UTI 2.79 5.20 1.38 14.68

Banks/FIs - 7.76 0.03 13.97

FIIs 1.65 7.84 0.17 1.27

Public corporate bodies

5.41 4.24 2.25 9.41

Indian public 2.29 23.71 6.77 17.09

NRIs/OCBs - - - -

Others 0.02 0.24 0.66 0.43

Page | 91

No of shares 62145177 135992817 32585217 42055538

Findings :

Indian FMCG Industry:

 In the Indian FMCG sector, rural India accounts for more than 40% of the country’s

consumption. It is our understanding that as prosperity percolates across the lower levels of

India’s income pyramid, the FMCG industry will outperform its earlier annual growth

average. As the Indian economy is reporting highest ever growth, there are a number of

pockets of optimism:

   

• Urban demand: We feel that a 10% annual growth will continue to drive FMCG sector

growth.

• Rural demand: A huge proportion of India’s population lives in rural villages; the per capita

consumption in these pockets is among the lowest. In our opinion, we have reached the

tipping point and annual demand is now soaring.

• Infrastructural development: We feel that planned infrastructure development – roads, ports,

railways and airports – will accelerate FMCG growth.

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• Low manufacturing base : We foresee that India’s low-cost manufacturing base will enable

it to address the growing FMCG demand in Bangladesh, Sri Lanka, Middle East, Pakistan

and similar countries; besides, non-resident Indians in the UK and the USA represent a

prospective market.

• Brand consciousness: We perceive increasing brand consciousness as consumers gradually

move away from loose and unbranded alternatives.

• Favourable tax structure: The introduction of VAT will reduce longstanding tax

ambiguities; Companies in tax exemption zones will benefit.

The fringe benefit tax rationalization on brand ambassadors, celebrity endorsement as well as

tours and travels will strengthen the FMCG sector.

• Modern retail formats: We see modern retail stores accelerating FMCG off take and leading to a greater proportion of the growth of branded and value-added products.

COMPANY:

Colgate-Palmolive:

Focus on core business will give company a steady income stream. The company has high

brand recognition and its products are used in almost every house of the country. The

company is facing heavy competition in most of its product lines. Colgate has focused solely

on its core strength—oral dental care products. Through its marketing efforts, the company

has retained the top position in product categories such as toothpastes and toothbrushes. The

company’s profits have increased resulting in increase of its share value. This has resulted in

increased shareholder wealth which has had a positive impact on the company’s reputation

and growth. Colgate’s continuous interaction with the people through its various initiatives

has helped the company in increasing trust and revenues. Colgate is doing well in the market

and will continue to do so only if the company is able to face the stiff competition from its

rival firms.

Page | 93

Gillette India:

Strong brand value, and various products catering to all income groups are the key points for

the companies’ growth. The increasing needs of men in relation to grooming themselves and

the look good idea have helped boost the sales of its products. The company’s timely

introduction of products has given it a first mover’s advantage and faces less or no

competition in the industry. Some of the company’s good products are priced high, which

makes them inaccessible to the low and middle income groups of the society. However its

brand value and years of experience in the industry will help them overcome all possible

threats and prosper in the coming future.

GlaxoSmithKline Consumer Healthcare:

Huge segmental growth potential, strong brand recall, strong balance sheet and cash flows

makes GSK Consumer one of the best plays in the FMCG space. Furthermore, its growth

strategy of launching new products, capacity expansions and targeting new segments will

continue to drive its growth in future. Its white beverage brand 'Horlicks' pioneered the

broadening of the malted beverage market in India. And with low penetration levels and

rising income, the company is attractively placed. It is believed that the increase in the

earnings power of the company in the medium term is not being reflected in the current stock

price. It has continuously tried to improve its operating margin quarter after quarter and

showed signs of improvement over the recent years.

Emami:

The Company has been growing at a fast pace since 2000, introducing new products now and

then and aggressive marketing strategies. It can draw synergies from Zandu, which it

acquired recently. The company’s products have less brand awareness which is to an extent

hampering its growth. Moreover if the Brand is recognized the company is not. For Example

people are well aware of Fair and Handsome but when asked which company the product

belonged only a few people could give the name of the company.

Emami’s products in the domestic market, would be fitted into a four-layer pyramid structure

with the top layer being made up by ultra premium brands, the second tier representing the

premium products, the third comprising what we call the ‘class for the mass range' for buyers

Page | 94

and finally the range for mall-based and institutional sales which will help in efficient

targeting of the customers helping them to relate to the customers in a better way. In

overseas markets, Emami would be engaged in international brand building under the

guidance of foreign experts to begin international brand exports as early as possible. In the

short term, there could be contract manufacturing of Emami products and brands overseas by

entities there helping them expand their market.

The Sales of the company have also increased over the years and Emami now play an

important role in the FMCG industry. The company’s products are being well accepted by the

general public leading to its growth. Emami has a good hold in the industry and has the

potential of obtaining greater market share.

BIBLIOGRAPHY:

Annual Report of Emami (07-08)

Annual Report of Colgate-Palmolive (07-08)

Outlook money (Magazine | Jun 03, 2009)

www.business-standard.com

www.bharatbook.com

www.colgate.com

www.colgate.co.in

www.economywatch.com

www.emamigroup.com

www.emamiltd.in

www.equitymaster.com

www.finance.yahoo.com

www.gsk.com

Page | 95

www.icmrindia.org

www.indiaretailbiz.com

www.moneycontrol.com

www.naukrihub.com

www.wikipedia.org

www.webindia123.com

Page | 96